2. (7 points) The following is the Bloomberg estimation of regression beta using two years of weekly data from 3/09 to 2/11 for Westgate consulting company: Returnwestgate -0.051%+1.371*Returns&P500 R squared=0.526 a. If the average (annualized) risk free rate between 3/09 and 2/11 was 2.60%, estimate the annualized Jensen's alpha for Goldman Sachs during this period. b. What's the proportion of the risk of Westgate coming from market? c. Westgate has 1.8 billion shares, trading at $40 a share and $ 28 billion in total debt outstanding now in Feb 2011. This capital structure is stable during the regression period. Assume that Westgate is planning to buy a social media company with market capitalization $30 billion and no debt. It plans to borrow $12 billion and fund the rest $18 billion with new equity to buy this company. The levered beta of the social media firm is 1.5 and marginal tax rate is 40%. Estimate the levered beta for Westgate after the transaction. (You can assume the social media company has a negligible cash balance)