firm has only 2 assets on its balance sheet with the below market values and CAPM betas. The risk free rate is 3% pa and the market risk premium is 5% pa. Assume that the CAPM is correct and all assets are fairly priced.

Item	Market Value	Beta
Cash Asset	0.5	0
Truck Asset	0.5	2
Loan liabilities	0.25	0.1
Equity Funding	?	?

Which of the following statement is not correct?

a. Firm's market value of equity is $0.75m and debt to assets ratio is 25%

b. Equity beta is 1.4

c. Equity return id 10% pa. d. required return is 10% pa.

d. required return of debt is 3.5% pa.

e. WACC before tax is 8% pa

If the firm then pays off (retires) all of its loan liabilities using its cash. Ignore interest tax shields. Which of the following statements is not correct?

a. $0.25 decrease in loans to zero and cash to $0.25m.

b. Rise in thr asset beta to 1.333333 and required return on assets (or WACC before tax) to 9.666667% pa.

c. rise in the equity beta to 2 and required return on equity to 13% pa

d. Fall in the debt to assets ratio to zero