(i) Explain the meaning of all the terms in the following standard formula for the expected return of a stock and how it may be useful for managers of a firm owned by diversified stockholders: rE = rF+ B(rM-rF) (ii) Suppose that the firm's cost of debt, rD = 2%. Using the same notation as in the formula in (i) suppose that rE = 7% for an all-equity firm (zero debt) but rises to 8% for a firm with 20% debt (that is 80% equity); 10% for a firm with 30% debt; and 12% for a firm with 40% debt. Find the weighted average cost of capital (WACC) at each level of leverage and comment on the pattern observed.