A UK company, All Weather Plc., has two assets in place at t = 0. The first is a sunglasses business, the second asset is an umbrella business. The company has debt maturing in one year (t 1) with face value of 1200 and coupon rate equal to the risk-free rate. During the year, two states of nature may prevail: sunny (S) and rainy (R), and because this is how Britain is, the probability of S is only 0.4. The current risk-free rate is 0% and the market risk premium is 10%. Thereafter, sums are in million. At t = 1, the sunglasses business generates cash flows of 1000 in S and 500 in R, and the umbrella business generates cash flows of 500 in S and 1000 in R. At t = 0, the asset betas for sunglasses and umbrella businesses are 0.7692 and -0.5882, respectively. a) Calculate the current unlevered value of All Weather Plc. (10 marks) b) Calculate the current value of equity and debt and their cost of capital. What is the WACC for All Weather Plc.? [15 marks] c) Determine the risk-neutral probability of the two states of nature. A UK company, All Weather Plc., has two assets in place at t = 0. The first is a sunglasses business, the second asset is an umbrella business. The company has debt maturing in one year (t 1) with face value of 1200 and coupon rate equal to the risk-free rate. During the year, two states of nature may prevail: sunny (S) and rainy (R), and because this is how Britain is, the probability of S is only 0.4. The current risk-free rate is 0% and the market risk premium is 10%. Thereafter, sums are in million. At t = 1, the sunglasses business generates cash flows of 1000 in S and 500 in R, and the umbrella business generates cash flows of 500 in S and 1000 in R. At t = 0, the asset betas for sunglasses and umbrella businesses are 0.7692 and -0.5882, respectively. a) Calculate the current unlevered value of All Weather Plc. (10 marks) b) Calculate the current value of equity and debt and their cost of capital. What is the WACC for All Weather Plc.? [15 marks] c) Determine the risk-neutral probability of the two states of nature