Q2. Expect that stock in Alpha Air Freight has a beta of 1.2. The market risk premium is 7 percent, and the risk-free rate is 6 percent. Alpha's last dividend was $2 per share, and the dividend is expected to grow at 8 percent indefinitely. a. The stock currently sells for $30. Analyze how it will be Alpha's cost of equity capital. b. Suppose the Japanese exchange rate is currently 105 yen per dollar. The inflation rate in Japan over the next three years will run, say, 2 percent per year, whereas the U.S. inflation rate will be 6 percent. Based on relative PPP, Explain how much will the exchange rate be in three years. Because the U.S. inflation rate is higher, we expect that a dollar will become less valuable. The exchange rate change will be 2% -6% = - 4% per year. "Evaluate Over three years, the Exchange how much rate will fall to