1. Cipla Healthcare, a pharmaceutical firm, is considering investing in a new business - cosmetics. It has 400 million shares outstanding trading at $ 30 per share; its stock has a beta of 1.20. The firm has $1 billion in interest bearing debt outstanding and has operating lease commitments of $ 700 million each year for the next 7 years. The long-term treasury bond rate is 1.63% and the market risk premium is 4.87%. The unlevered beta for other cosmetics firms is 1.25. If the pre-tax cost of borrowing for Cipla is 7%, estimate the following: (three points each)

1. Beta for this project(Hint: Levered up the unlevered beta)
2. Cost of Equity
3. the current (Market Value) Cost of capital that you would use to analyze this project. (The tax rate is 40%)(Hint: Find the present value of Debt(interest bearing debt + operating lease commitment)