Business and Financial Risk-MM Model Ar Tanpa has just been incorporated, and its board of directors is grappling with the question of optimal capital structure. The company plans to offer commuter air services between Tampa and smaller surrounding cities. Ja air has been around for a few years, and it has about the same basic business risk as Air Tampa would have. Jaxair's market- determined beta is 1.5 and it has a current market value debt ratio (total debt to total assets) of 55% and a federal-plus-state tax rate of 40%. Air Tampa expects to be only marginally proftable at start-up; hence its tax rate would only be 20%. Air Tampa's owners expect that the total book and market value of the firm's stock, if it uses zero debt, would be $12 million Air Tampa's CFO believes that the MM and Hamada formulas 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 equations V-Vu + Vitas - Vu+ TD, rurX(1 - )(b/s), and b - bu[1 + (1 - T/CD/S)).) a istimate the beta of an unlevered firm in the computer airine business based on Juxair's market determined beto. (Hint: This is a levered beta; use Equation b. bull +(1.TX0/5)) and solve for by) Do not round Intermediate calculations. Round your answer to three decimal places b. Now assume that re-for-8% and that the market risk premium iur-4%. Find the required rate of return on equity for an unlevered commuter airline. Do not round Intermediate calculationsRound your answer to three decimal places Air Tampa is considering three capital structures (1) 92 million set, 23 millon debe, and (3) $6 million debt. Estimate Air Tampa's rs for these debt levels. Do not to two decimal places 1. Ar Tompass for $2 million obt: 3. Air Tampa's rfor $4 milion debti 1. Air tomon's r. for 36 million debe % d. Calculate Air Tampa's rat 16 million debt wivie assuming its federal-plus-state tax rate is now 40%. (Hint: The increase in the tax rate causes vu to drop to $9 millon) Do not round intermediate calculations. Round your answer to two decimal places Compare this with your corresponding answer to part Higher tax rate the financial risk premium at a given market value debt/equity ratio