In a two$-$factor APT model, easy Jet has a factor beta of $1\mathrm{.}25$ on the first factor portfolio, which is highly correlated with the change in GDP$,$ and a factor beta of $-0\mathrm{.}8$ on the second factor portfolio, which is highly correlated with interest rate changes. If the risk$-$free rate is $5\%$ per year, the first factor portfolio has a risk premium of $2\%$ per year, and the second has a risk premium of $-0\mathrm{.}5\%$ per year:

$($a$)$ Compute the cost of capital for the BA Cityflyer project $($from Exercise $5\mathrm{.}3)$ that uses easyJet as the appropriate comparison firm. Assume no taxes and no need for leverage adjustments.

$($b$)$ What is the present value of an expected $5$ million BA Cityflyer cash flow one year from now, assuming that easy.Jet is the appropriate comparison? Assume no taxes and no need for leverage adjustments.

$($c$)$ What are the cash flow beta and the certainty equivalent for the BA Cityflyer project?