Business and Financial Risk-MM Model Air Tampa has just been incorporated, and its board of directors is grappling with the question of optimal capital structure. The company plans to offer contributed smaller surrounding cities. Jaxair has been around for a few years, and it has about the same basic business risk as Air Tampa would have Jaar's markedetermined bei 15, and thus st market value debt ratio (total debt to total assets) of 50% and a federal-plus-state tax rate of 40% Air Tompe expects to be only marginally profitable at the state would only 25%. Air Tampa's owners expect that the total book and market value of the firm's stock, I uses zero debt, would be $12 million Air Tump's cro believes that the Man Wamaa fomes for the value of a levered firm and the levered firm's cost of capital should be used because zero growth is expected. These are given in equation - Vu+ VWTD. 10T (D/S), and b = bu[1 + (1 -T)(D/S)).) Estimate the bets of an unlevered firm in the commuter airline business based on Jaar's market determined beta. Ceint: This is a towered butasuse Equation + 4.0/5) and solve for bu.) Do not round intermediate calculations. Round your answer to three decimal places. b. Now assume that ra = -11% and that the market risk premium RPM = 54. Find the required rate of return or equity for an inlevered commuter aline. Do otrounds intermediate calculations Round your answer to three decimal places c. Air Tampa is considering three capital structures: (1) $1 million debt, (2) $2 milion debt, and (3) $3 million dest. Estimate Air Tampo's ne for these dobe vevels. Do not found intermediate calculations. Round your answers to two decimal places 1. Air Tampa's r, for $1 milion debt: 2. Air Tampa's rs for $2 million debe: % 3. Air Tampa's Ts for $3 million debt! d. Calculate Air Tampa's rs at $3 million debt while assuming its federal-plus-state tax rate is now 40%. (HintThe increase in the tax rate causes to drept 8.6 mi) entround Intermediate calculations. Round your answer to two decimal places. Compare this with your corresponding answer to partc. Higher tax ratesclect- the financial risk premium at a given market value debequity ratio