hello i need to solve this please help hope you a nice evening.

You have been asked to estimate the beta for a large South Korean company, with large

holdings in steel and financial services. A regression of stock returns against the local

market index yields a beta of 1.10, but the firm is 15% of the index. You have collected the

average betas for global companies in each of the sectors, as well as the average debt equity

ratios in each sector:

Sector

Average Beta

Average D/E ratio

Steel

1.18

30%

Financial Services

1.14

70%

(The average tax rate for these firms is 40%)

In the most recent period, the company you are analyzing earned 70% of its operating

income from steel

and 30% from financial services. The firm also had a debt/equity ratio of

150%, and a tax rate of 30%.

a. Estimate the beta for the company

( 3 points)

b. If the Korean government bond rate in nominal Won is 12%, Korea's rating is BBB

(Country bonds with this rating earn a spread of 2% over the U.S. long bond rate) and

Korean equities are twice as volatile as Korean bonds, estimate the cost of equity for this

company.