Shooting Star Corporation (SSC) wishes to establish a new production plant in the

East midlands under a new company named Orange Star (OS).

SSC Beta = 1.2

SSC D/E = 0.3

OS D/E = 0.6

Tax rate = 40%

Risk Free Rate = 5%

Market Return =15%

Where D/E is Debt/ Equity ratio

a) What is OS Beta?

b) What is OS cost of equity