As of September 2012, Google (GOOG) had no debt. Suppose the firm's managers are considering issuing zero-coupon debt due in 16 months with a face value of

$ 165.7

billion, and using the proceeds to pay a special dividend. Google currently has a market value of

$ 231.3

billion and the risk-free rate is

0.28 %

Using an implied volatility

=38.60%,

answer the following:

a. If Google's current equity beta is 1.16,

estimate Google's equity beta after the debt is issued.

b. Estimate the beta of the new debt.

(Note: Make sure to round all intermediate calculations to at least five decimal places.)