QUESTION 4. [3 points]Currently, Hotel X has no debt (i.e.,leverage=0). The CEO of Hotel X considers increasing leverage (=debt/(debt+equity)) 0.8. Currently, Hotel Xs CAPM beta is 1.0. The cost of debt () will be 10%, risk-free rate () is 1%, and the market return() is 11%. Assume that the corporate tax rate () is ZERO. Your task,as the CFO of HotelX, is to provide the cost of capital under this proposed capital structure (i.e., 80% leverage).

4-1. The beta of debt is ( ).

4-2. What is the cost of capital under the proposed capital structure (i.e.,80% leverage)?

4-3. According to Modigliani-Millers propositions (under the required assumptions), what is the optimal level of leverage that maximize the Hotel Xs value? Please show Work