Assumptions	Symbol	Before Diversification		After Diversification
Correlation between G-H and the market	jm	0.93		0.74
Standard deviation of G-H's returns	j	29.2%		25.4%
Standard deviation of market's returns	m	17.3%		17.3%
Risk-free rate of interest	krf	3.6%		3.6%
Additional equity risk premium for internationalization	RPM	0.0%		3.2%
Estimate of G-H's cost of debt in U.S. market	kd	7.1%		6.8%
Market risk premium	kmkrf	5.4%		5.4%
Corporate tax rate	t	42%		42%
Proportion of debt	D/V	38%		32%
Proportion of equity	E/V	62%		68%

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Genedak-Hogan (G-H) is an American conglomerate that is actively debating the impacts of international diversification of its operations on its capital structure and cost of capital. The firm is planning on reducing consolidated debt after diversification. Senior management at Genedak-Hogan is actively debating the implications of diversification on its cost of equity. All agree that the company's returns will be less correlated with the reference market return in the future, the financial advisors believe that the market will assess an additional 3.2% risk premium for "going international" to the basic CAPM cost of equity. Calculate Genedak-Hogan's cost of equity before and after the international diversification of its operations, with and without the hypothetical additional risk premium, and comment on the discussion.

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Part 1

What is Genedak-Hogan's cost of equity before the international diversification of its operations without the hypothetical additional risk premium?

enter your response here%

(Round to two decimal places.)