As part of its efforts at diversification, the Theta Theater organization, producer of Broadway plays is considering acquiring a movie theater chain. A prime acquisition candidate is consolidated cinemas, currently owned by conglomerate, Tryon. Although Tryon has given theta , what it feels is an accurate estimate of expected cash flows from cinemas chain; Theta would like to have its own estimate of required rate of return to apply to these cash flows. The CFO has acquired the following information on independently owned movie house chains. Movie house Beta. D/TA NCO theater 1.7. 0.4 Worldwide 0.5. 0.1 Screenrocks 2.5. 0.5 Ultimate theater -0.2. 0.85 Using a risk free rate of 7.5% and a market risk premium of 8.5 percent what is your estimate of the cost of equity capital for consolidated? Theta has a debt to asset ratio of 0.6 what is the relevant risk and return after acquisition. Discuss and explain with an example the difference between levered and unlevered beta. With an example explain why its important to use levered and unlevered beta in different situations