1. Clarus Corp is a company that operates in two businesses, steel and technology, and in two countries, the US and Brazil. The table below summarizes the revenues by business and by country (in millions): US Brazil Total Steel $800.00 $400.00 $1.200.00 Technology $600.00 $300.00 $900.00 Total $1,400.00 $700.00 You have estimated unlevered betas of 0.90 for steel and 1.20 for technology and equity risk premiums of 6% for the US and 9% for Brazil. The US Treasury bond rate is 3% and the Brazilian $ denominated bond rate is 5%. Clarus Corp has 315 million shares, trading at $10/share, no debt outstanding and no cash balance. The corporate marginal tax rate is 40%. a. If you assume that market value is 1.5 times revenues in both businesses, estimate the US$ cost of capital for Clarus. (2 points) b. Now assume that Clarus plans to borrow $1.2 billion at 5% (pre-tax) to pay a special dividend of $450 million and to reinvest the rest ($750 million) in its technology business in Brazil. Estimate the cost of capital for the company in US$ after the debt issue and expansion. (4 points)