b. Alpha Corporation and Beta Corporation are identical in every respect except that Alpha is not levered. Beta Corporation pays 6% annual interest rate on its 1 million of outstanding debt. Financial information for the two firms appears in the table below. All earnings streams are perpetuities. After paying any interest on debt, both companies use all remaining free cash flows to pay dividends each year. Assume perfect capital markets (No taxes or bankruptcy costs). Alpha Corporation Beta Corporation Projected operating income in one year 300,000 300,000 Year-end interest on debt O 60,000 Projected earnings available to common shareholders in one year 300,000 240,000 Current market value of stock 2,400,000 1,400,000 Current market value of debt O 1,000,000 Current value of the form 2,400,000 2,400,000 Suppose you currently hold 5% of Beta's equity and are able to borrow at 6% per annum. Using homemade leverage, construct an alternative strategy that replicates your investment in Beta's equity and provides the same payoffs in one year. Use the capital structure irrelevance theorem (Proposition 1) of Modigliani and Miller (1958) to motivate your answer. (12 marks)