. Find the Levered Beta and Cost of equity in the first table and find the Cost of equity and WACC in the second table then answer the questions below the tables.

	No DEBT	Moderate Debt	High Debt
Weight of Equity	1	0.6	0.2
Weight of debt	0	0.4	0.8
Tax rate	0.21	0.21	0.21
Unlevered Beta	2	2	2
Levered Beta
Risk-free	3.15%	3.15%	3.15%
MRP	5.04%	5.04%	5.04%
Cost of equity

	No Debt	Moderate Debt	High Debt
weight of equity	1	0.6	0.2
weight of debt	0	0.4	0.8
Cost of equity
Cost of debt	0	4%	5.5%
Tax rate	0.21	0.21	0.21
WACC

What do you notice about the beta and cost of equity as debt increases? What explains this?

What do you notice about the cost of debt as debt increases? What explains this?

What do you notice about the cost of capital as debt increases? What explains this?

Thanks in advance