Friendly Circle $($FC$)$ is a company dedicated to putting you in touch with everyone you have ever wanted to forget, and sharing your details with total strangers. As part of their expansion plans, they need to invest in new servers to store the data they will subsequently divulge. These servers represent a big investment for FC$,$ and have a useful life of around $5$ years. FC has $$5,000,000$ in publicly traded bonds, paying a coupon rate of $6\%,$ and trading at par. FC also has equity that is privately held by it's founder, Mike Zuckerman, as well as some venture capital $($VC$)$ investors. The book value of this equity, as of the end of the last quarter, was $$6$ per share, and it has $500,000$ shares outstanding. The VC firm that has been advising FC has argued that, were FC to go public, it's value would likely be around $$14$ per share. You also have the following competitors' data available $($these competitors are publicly traded$)$:

Company Number of share Price per share Book value of debt Yield on debt Beta $($of equity$)$

Eye Share $1,000,000$ $$12\mathrm{.}00$ $$4,000,0007\%1\mathrm{.}9$

Yourspace $5,000,000$ $$16\mathrm{.}00$ $$2,000,0006\mathrm{.}5\%1\mathrm{.}3$

The most recent $5-$year government bond rate, as of today, is $5\%.$ The historical average since the early $1930\text{'}$s for the $5-$year government bond is $3\mathrm{.}5\%.$ The yield on $10-$year government bonds currently is $5\mathrm{.}5\%,$ and the historical average is $4\%.$ For $30-$year T$-$bonds, the current yield is $6\mathrm{.}5\%,$ whereas the historical average is $5\mathrm{.}5\%.$

Additionally, you estimate that the historic market risk premium is about $7\mathrm{.}5\%,$ measured from the early $1930\text{'}$s to the most recent data. The tax rate is $34\%.$

Tip: If you need to take an average involving the competitor's data, you should use a straight $($rather than a weighted$)$ average.

What is FC$\text{'}$s leverage ratio $($i$.$e$.,$ D$/$V$),$ based on book values?

Group of answer choices

$0\mathrm{.}63$

$0\mathrm{.}42$

$0\mathrm{.}20$

$0\mathrm{.}71$

None of these.

What is FC$\text{'}$s leverage ratio, based on estimated market values?

Group of answer choices

$0\mathrm{.}42$

$0\mathrm{.}63$

$0\mathrm{.}20$

$0\mathrm{.}71$

None of these.

Calculate an estimate of the asset beta for FC$.$

Group of answer choices

$1\mathrm{.}346$

$1\mathrm{.}600$

$1\mathrm{.}398$

$1\mathrm{.}07$

None of these.

Whatever you answers to the previous parts, assume from now on that FC$\text{'}$s leverage ratio is $40\%.$ Calculate an estimate of the equity beta for FC$.$

Group of answer choices

$2\mathrm{.}243$

$2\mathrm{.}743$

$3\mathrm{.}589$

$4\mathrm{.}267$

None of these.