Par llli Long Problems Question 1 You have run a regression of returns of Devonx machine to manufacturer, ainst the Index using monthly returns over the last 5 years and arrived at the following regressi (14 mars a) Returno -0.20% + 1.50 Returns The stock had a Jensen's alpha of +0.10% (on a monthly basis)over this period i has the stock bean the market? Explain (1 mark) ii. estimate the monthly risk-free rate during the last 5 years. (1 mark) b) If the standard error of the regression beta is 0.5. Estimate the range for the regression beta at a 95% confidence interval? (1 mark) c) If the market risk premium is 6.5%, the tax rate is 40% and Devonex's bonds are rated A, and the default spread for A rated bonds is 1.25%. i. Estimate the cost of equity for Devonex (1 mark) (1 mark) ii. Estimate the cost of debt for the firm (1 mark) iii. Estimate the weighted average cost of capital for Devonex Page 10 of 12 Par llli Long Problems Question 1 You have run a regression of returns of Devonx machine to manufacturer, ainst the Index using monthly returns over the last 5 years and arrived at the following regressi (14 mars a) Returno -0.20% + 1.50 Returns The stock had a Jensen's alpha of +0.10% (on a monthly basis)over this period i has the stock bean the market? Explain (1 mark) ii. estimate the monthly risk-free rate during the last 5 years. (1 mark) b) If the standard error of the regression beta is 0.5. Estimate the range for the regression beta at a 95% confidence interval? (1 mark) c) If the market risk premium is 6.5%, the tax rate is 40% and Devonex's bonds are rated A, and the default spread for A rated bonds is 1.25%. i. Estimate the cost of equity for Devonex (1 mark) (1 mark) ii. Estimate the cost of debt for the firm (1 mark) iii. Estimate the weighted average cost of capital for Devonex Page 10 of 12