Please keep four decimal points for middle solutions and two decimal points for final solutions 1. You work for company BL and your work is to estimate the cost of capital for a new project. Your company plans to extend into a new business area. You have collected the following data for the new business expansion. Pure Play Company A Equity Beta (Be) 1.70 Debt-to-Equity ratio (D/E) 0.50 Company B 1.20 1.00 Both pure plays have a zero-debt beta. In addition, you estimate that the market risk premium is 6% and the risk-free rate is 2%. Answer the following questions. (1) Assuming a zero corporate tax rate, compute an estimate for the cost of capital for the new business. (2) Assuming the required rate of return on company BL debt is 4% (and assume the debt- beta is zero), the corporate tax rate is 25% (for company BL and the pure plays), and that the target debt-to-firm-value ratio for the expansion is 30%. Compute an estimate of the WACC for the new business