Using the Hamada Model, regarding the relation between beta of a levered firm and

the beta of a firm with no debt in its capital structure, calculate the following.

If the debt ratio is $W_D=\frac{\text{D}\text{e}\text{b}\text{t}}{\text{A}\text{s}\text{s}\text{e}\text{t}\text{s}}$ and equity ratio is $W_S=\frac{\text{E}\text{q}\text{u}\text{i}\text{t}\text{y}}{\text{A}\text{s}\text{s}\text{e}\text{t}\text{s}},$

beta of the firm with leverage is

$b_L=1\mathrm{.}35,T=21\%,$ debt ratio $=45\%,$ equity ratio $=55\%,$

A$.$ Calculate its beta without leverage.

B$.$ Would you consider this as the beta of assets? Why?

C$.$ Suppose the AA quality corporate bond yield is $5\%,$ and the market risk premium

is $7\%,$ calculate the overall cost of capital for this firm based on the capital asset

pricing model CAPM.

D$.$ If the earnings of this firm is $$900$ mil per year in perpetuity, calculate the value of

the firm.