5. The BMW company is debating the impacts of international diversification of its operations on its capital structure and cost of capital. The firm is planning on reducing consolidated debt after diversification. The following table shows the data of this firm before diversification and after diversification. Assumptions Correlation between BMW and the market Standard deviation of BMW's returns Standard deviation of market's returns Risk-free rate of interest Before After Symbols diversification diversification pjm 0.80 0.78 oj 29.0% 28.0% om 22.0% 22.0% krf 4.0% 4.0% Estimate of BMW's cost of debt in US market Market risk premium Corporate tax rate Proportion of debt Proportion of equity kd km-krf t D/V E/V 9.0% 6.0% 35.0% 30% 70% 7.0% 6.0% 35.0% 30% 70% Using the above assumptions, answer the following questions: a. Calculate the systematic risk (beta) before international diversification? (1.5 Marks) and after international diversification? (1.5 Marks) b. Calculate the cost of equity before international diversification? (1.5 Marks) and after international diversification? (1.5 Marks) c. Calculate the weighted average cost of capital byfore international diversification? (1.5 Marks) and after international diversification? (1.5 Marks) d. How would you describe the impact of international diversification on its costs of capital? (1 Mark)