Chengdu Motors is a new entrant in the auto industry in India. It specializes in small, customized cars, designed for middle-class Indian customers. Assume that the risk-free rate is 6.25%, and the market risk premium is 7.2%. As an analyst, you are working with the following data on a set of comparable firms. Chengdu Motors has a target Debt to Equity capitalization of 0.60. The beta of debt for Chengdu Motors is assumed to be negligible. The beta of debt for comparable firms is also assumed to be negligible. The tax rate can be taken as 33%. Assumptions: All five firms have comparable size

Company Name	Levered Equity Betas	Deb/Equity Capitalization
Faw Car Co. Ltd.	1.5	1
Dong Fend Automobile	1.3	0.70
Ah Jianghuai Auto Co.	1.2	0.22
Chang Auto Co.	2.1	2

Sub Question 1: What is the estimated equity beta (beta levered) for Chengdu Motors?

Sub Question 2: What is the estimated cost of equity for Chengdu Motors? (which range)

Sub Question 3: What is the estimated industry beta (average of unlevered beta) for the auto industry in the above question (which range the average of unlevered beta is in)?