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4. MM Proposition I without Taxes Alpha Corp. and Beta Corp. are identical in every way except their capital structures. Alpha Corp., an all-equity firm, has 15,000 shares of stock outstanding, currently worth $30 per share. Beta Corp. uses leverage in its capital structure. The market value of Beta's debt is $65,000, and its cost of debt is 9%. Each firm is expected to have earnings before interest of $75,000 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 9% per year. a. What is the value of Alpha Corp.? b. What is the value of Beta Corp.? c. What is the market value of Beta Corp.'s equity? d. How much will it cost to purchase 20% of each firm's equity? e. Assuming each firm meets its earnings estimates, what will be the dollar return to each position in part (d) over the next year? Construct an investment strategy in which an investor purchases 20% of Alpha's equity and replicates both the cost and dollar return of purchasing 20% of Beta's equity. f. g. Is Alpha's equity more or less risky than Beta's equity? Explain. 4. MM Proposition I without Taxes Alpha Corp. and Beta Corp. are identical in every way except their capital structures. Alpha Corp., an all-equity firm, has 15,000 shares of stock outstanding, currently worth $30 per share. Beta Corp. uses leverage in its capital structure. The market value of Beta's debt is $65,000, and its cost of debt is 9%. Each firm is expected to have earnings before interest of $75,000 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 9% per year. a. What is the value of Alpha Corp.? b. What is the value of Beta Corp.? c. What is the market value of Beta Corp.'s equity? d. How much will it cost to purchase 20% of each firm's equity? e. Assuming each firm meets its earnings estimates, what will be the dollar return to each position in part (d) over the next year? Construct an investment strategy in which an investor purchases 20% of Alpha's equity and replicates both the cost and dollar return of purchasing 20% of Beta's equity. f. g. Is Alpha's equity more or less risky than Beta's equity? Explain