A firm's assets have a beta of 0.8. The firm is financed with $80 million in equity and

$40 million in debt. The firm's debt has a beta of 0. The risk-free rate is 4% and the

market risk premium is 8%. What is the cost of equity capital for this firm? Round all

intermediate calculations to 6 decimal points. Your final answer should be within

0.10% of the correct answer choice.

13.60%

15.25%

10.40%

18.40%

Firms AAA and ZZZ are identical in all ways except for capital structure. Firm AAA is

financed completely with equity and firm ZZZ is financed with some equity and some

debt. The value of firm AAA's equity is $300 million. Firm ZZZ has $120 million of

debt. The earnings before interest and taxes of both firms is expected to be the

same amount each year forever. Both firms are subject to a tax rate of 25%. What is

the total value of firm ZZZ? Round all intermediate calculations to 6 decimal points.

Your final answer should be within $10 of the correct answer choice.

$180 million

$360 million

$420 million

$330 million