Assume a firm has $2 billion in debt and $2 billion in equity, a beta of 1.8 and a tax rate of .2. Its cost of borrowing is 5%. The riskless return is 2% and the expected equity risk premium is 5%

What is the firms unlevered beta?

		1
		1.4
		1.5
		0.8

What is the firm's cost of equity?

		13.15%
		12.45%
		11.00%
		12.00%