CAPM and MM Combined – Chapter 21

Hi John.

Could you please explain working Q200-BPP: S Co Equity Beta 1.6 and debt: equity 1:3 considering new project to manufacturing farm has asset beta 1.1 and debt: equity 2:3. The risk free rate return is 5% risk premium is 3%, corporation tax rate 40%, Using CAPM, what suitable cost of equity for S Co to use its in appraisal of the farm project( 1 decimal place)?

I have following your example 3 chapter 21 , my answer: 7.8%, it incorrect!