Questions 1 - 6 concern Midland's firm level costs of capital 1) What is Midland's beta based on its target capital structure? 2) Compute Midland's cost of equity using the beta from Question 1 and the 30-year Treasury yield to maturity as the risk-free rate. 3) What is Midland's cost of equity using the constant dividend growth model? Use arithmetic average to estimate constant growth rate. Is the constant dividend growth model appropriate given Midland's historical dividend growth? [Hint: Use Exhibit 4] 4) What is Midland's cost of debt if the debt maturity is 30-years? 5) What is Midland's WACC using the Security Market Line approach? Questions 6 - 8 concern the Exploration & Production (E&P) division's costs of capital 6) What is the average unlevered beta of firms comparable to the E&P division? Assume all comparable firms have a tax rate of 40%. 7) Based on your answer to Q6, what is the E&P division's cost of equity? Use the 30-year Treasury yield to maturity as the risk-free rate. 8) What is the E&P division's WACC? Assume E&P division's debt has a maturity of 30 years