LCX Limited expects to pay a dividend of $2.22 next year. It also expects its cash dividends to grow 5% per year forever. The company has a debt ratio L = 35% and its borrowing rate is rd= 9%. LCX pays corporate taxes at the rate of 30%. If risk-free rate is 6% and the market interest rate is 12%, and LCXs common stock is currently selling at $20 per share, answer the questions below :

a.What is the current (leveraged) required return reon LCXs common stock ?

b.What is its WACC (after-tax) ?

c.What is LCXs unleveraged required return r ?

d.What is the unleveraged beta implied by r ?

e.What comment you will made about the estimates in parts a to d if you learnt that the market model estimated a leveraged beta of 2.2 for LCXs common stock ?