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Question 2 Alpha PLC's stock had a beta of 0.95. The treasury bill rate at the time was 5.8%, and the treasury bond rate was

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Question 2 Alpha PLC's stock had a beta of 0.95. The treasury bill rate at the time was 5.8%, and the treasury bond rate was 6.4%. The firm had debt outstanding of $ 1.7 billion and a market value of equity of $ 1.5 billion; the corporate marginal tax rate was 36%. Alpha PLC also had debt outstanding of $ 1.7 billion and a market value of equity of $ 1.5 billion; the corporate marginal tax rate was 36% REQUIRED: a. Estimate the expected return on the stock for a short-term investor in the company. b. Estimate the expected return on the stock for a long-term investor in the company. c. Estimate the cost of equity for the company. d. Assuming that the current beta of 0.95 for the stock is a reasonable one, estimate the beta for the company. e. How much of the risk in the company can be attributed to business risk and how much to financial leverage risk? f. What if a company has a Beta greater than market beta? Is it good/bad for the company? Comment with example. Question 2 Alpha PLC's stock had a beta of 0.95. The treasury bill rate at the time was 5.8%, and the treasury bond rate was 6.4%. The firm had debt outstanding of $ 1.7 billion and a market value of equity of $ 1.5 billion; the corporate marginal tax rate was 36%. Alpha PLC also had debt outstanding of $ 1.7 billion and a market value of equity of $ 1.5 billion; the corporate marginal tax rate was 36% REQUIRED: a. Estimate the expected return on the stock for a short-term investor in the company. b. Estimate the expected return on the stock for a long-term investor in the company. c. Estimate the cost of equity for the company. d. Assuming that the current beta of 0.95 for the stock is a reasonable one, estimate the beta for the company. e. How much of the risk in the company can be attributed to business risk and how much to financial leverage risk? f. What if a company has a Beta greater than market beta? Is it good/bad for the company? Comment with example

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