Kathrine estimated the stock beta for TASTA, a new EV company, using the past 60 months of data,

(R_it R_f ) = .5+ 1.3(R_mt R_f ) + e_it (3.50) (.33)

The current risk-free interest rate is 4% and the market returns Rm is 9%. Kathrine convinced the local financial firms to raise long-term debt for TASTA at the premium of 2% over the risk-free rate. Currently, TASTA pays 30% for corporate taxes.

1. If CAPM works, then what should be value of the intercept in equation?

2. Can you test your prediction above using a t-test, is it possible without the use of excel?