gmestion 1: A local electric utility (stock ticker: DVS) faces a downward demand curve given by P = 100 (1/ 1000) Q, where Q is megawatt hours demanded annually. The monopoly has constant marginal costs of $20 per megawatt hour. (a) (b) (C) (d) (e) If the electric utility is unregulated, what price will it set? What are the monopolist's prots? Download the le ps4_data.csv or ps4_data.dta from Canvas. The les provide the daily closing price for the S&P 500 and for our hypothetical utility, DVS, for the last ve years. First, calculate the daily return for both the S&P500 and the stock ticker by calculating the change in the close relative to yesterday's close. (i.e., the daily return on day t = (close on day t close on day tl) I close on day tl) Using these two sequences of daily returns, calculate the rm's beta using either a regression or a line of best fit plot similar to what you did in problem set 2. Assume that the market return (above the risk-free rate) is 10%. What is the fnm's cost of equity? The fmn is nanced by 60% equity and 40% debt. The 40% of the rm covered by debt consists of the following three bonds: a. $1 million @ 6% b. $2 million @ 9% 0. $3 million @ 7% If the rm's marginal tax rate is 20%, calculate the rm's cost of debt and its cost of capital. Based on your calculation in part (b), you determine that the rm has annual xed costs of $1.2 million. If the regulator sets linear prices so that the electric utility breaks-even (ie. Prots = 0), what price will he/she set? Suppose that demand for electricity varies over the course of the day and is most inelastic in the middle of the day. Illustrate using a pair of graphs how the regulator could use this information to