Notes: market risk premium of 5.5% for T. Bond Rate, and 8.7% for the T. bill rate, and tax of 40% where none is specified.

Q6: Portugal Telecom has a beta of 0.80 and debt to equity ratio of 15%. Although all the current business of the firm comes from phone service, the firm is considering expanding into the internet. If the internet business is going to be 20% of Portugal telecom's future business, estimate the beta for the firm. (You can assume that thn debt to equity ratio remains 15% and t' tax rate for the firm is 40%). w