Question 1 (total of 12 marks):

The company has 3 million shares with a market value of $100 each. The shares expected dividend yield is 3% pa and their total returns have a beta of 1.5.

The company is funded by $200 million worth of 5-year bonds priced at par which pay a fixed coupon of 4% pa. The corporate tax rate is 30%.

Government bonds pay a fixed coupon rate of 2% pa and yield 3% pa.

The ASX200 market index has an expected dividend yield of 4% pa and an expected total return of 8% pa. All rates are effective annual rates. Assume a classical tax system.

Question 1b (3 marks): Calculate the companys required return on equity ().

Question 1c (3 marks): Calculate the companys after-tax WACC.

Question 1d (3 marks): Calculate the companys levered beta of debt () based on its required return on debt.

Please answer with detailed explanations of the formulaes and where the values are taken thank you!