Question $6[5$ marks$]$

Swyft is a private startup firm that operates peer$-$to$-$peer ride sharing service. The firm has business risk similar to that of Uber Technologies Inc. $($NYSE: UBER$).$ To evaluate Swyft$,$ a venture capitalist has collected the following information:

$$ Swyft has financed $40\%$ of its total investments using debt capital and plans to maintain its current capital structure $($i$.$e$.,$ leverage ratio$)$ in the foreseeable future. Its debt beta is estimated at $0\mathrm{.}3.$ The firm faces a marginal tax rate of $30\%.$

$$ Uber has market capitalization $($i$.$e$.,$ equity$)$ worth $$4$ billion and debt worth $$8$ billion. Its equity beta and debt beta, respectively, are estimated at $2\mathrm{.}1$ and $0\mathrm{.}1.$ Uber$$s marginal tax rate is $25\%.$

$$ The risk$-$free rate is $3\%$ and the market risk premium is $6\%.$

Answer questions a$)$ and b$)$ below. $($Lecture notes pp$\mathrm{.}37-41,$ example pp$\mathrm{.}42-44)$

a$)$ Determine the unlevered asset beta and unlevered cost of capital.

Answer $($show the steps$/$calculation toward your results$)$:

b$)$ Find the weighted average cost of capital $($WACC$)$ for Swyft$.$

Answer $($show the steps$/$calculation toward your results$)$: