3. [8 Points) Five Star, Inc. financed its total assets by 70% of equity and 30% of debts. The equity had a beta of 1.1. The financial managers in the company decided to adopt more aggressive debt policy by increasing the financial leverage of the company. The will change the capital structure as 50% of equity and 50% of debts. Since the business lines of the company did not have any change, the beta of assets of the firm should keep the same. The tax rate of the firm is 30%. What should be the beta of the equity after the firm changed its capital structure? 4. [12 Points] Given the following information for Lightening Power Co., find the weighted average cost of capital (WACC). Assume the company's tax rate is 21%. Bond Coupon Price Quote Maturity Par Value Number Coupon Rate (% of Par) of Bonds Payment 1 6.00% 102 5 years $1,000 5,000 Semiannual 2 7.50% 115 10 years $1,000 4,500 Semiannual Common stock: 310,000 shares outstanding, selling for $57 per share; the beta is 1.05. Market: 7% market risk premium and 4% risk-free rate