Deutsche Telekom and Orange have a similar economic risk. The beta of Orange shares is 0.67, and it is 0.8 for Deutsche Telekom. If the risk-free rate is 3% and the equity risk premium is 9%, what are the shareholders'

required returns? If the net debt/shareholders' equity ratio is 1 in value for Orange, what is it for Deutsche Telekom, which has a cost of debt of 5.4%

compared with 5% for Orange (imagine that this is a tax-free world)?

AppendixLO1