Ivar Tusk is the owner ofa successful carmanufacturingcompany.In the transportation sector,it is very common for firms to have relatively high debt ratiosand a high return on equity. His own company Edison, for example, has a debt-to-value ratio of 80% and a return on equity of 17.5%. On a recent management course he learned that managers often chose too low debt ratios and, hence, do not fully exploit the tax advantages of debt. He suspects that this is also the case in the technologyindustry and he sees a business opportunity. After some market research,he collected the following information about the equity beta's (e), stock price volatility (annual standard deviation), leverage (debt/total assets in market values) and cost of debt (rd

) of the three leading companies in the tech industry.