• answer all the problems by first giving the right formulas (without numbers) and then computing the numerical answers and results.
• Show all the work please

1.The totalmarket value of ABC stocks is $6.000.000 and the total market value of itsrisk-freedebtis $4.000.000. The financial analyst estimatesthe beta of the stocksat 1.5 and the market premium at 10%for arisk-freerate of 8%.

a)Evaluate the expected return (cost of equity) of the ABC stocks.

b)If the company has a beta equals to 0.9, estimate the cost of capital of the company.

c)Suppose that ABC pays back $3.000.000 of its debt and replace them by preferred shareswith a beta of 1.2. The new beta of the companybecomes then equal to 1.26. What is the new weighted average cost of capital?