Singapore Industrial Gas (SIG) is trying to understand its cost of capital, capital structure, and the impacts of any change. You have been given the following information to work with:: Current market value of debt is $3 million with a yield-to-maturity of 8%. Current market value of equity is $6 million with 3 million shares outstanding and a required return of 11%. If SIG intends to seek debt financing, they are able to do so through a bond issuance valued at $2 million at a yield-to-maturity of 9%. If SIG intends to seek equity financing, they are able to issue $2 million worth of new shares. The 3-year US treasury bill rate is 2%, 3-year Singapore treasury bill rate is 1.5%, 10- year US treasury bond rate is 4%, 10-year Singapore treasury bond rate is 3.5%. The rate of return on the S&P 500 is 10%, rate of return on the Straits Times Index is 9.3%. The following are the observed betas of SIG's closest competitors: Comparable Company Observed Beta Percentage of value that is debt 1 1.6675 2 1.3041 3 1.8878 4 1.3923 Question 2 SHOW ALL WORK FOR FULL CREDIT a) Estimate SIG's unlevered beta. 30 20 33 17 (9 marks) b) Assuming that SIG can only choose either the debt or equity financing, compute the firm's levered beta under each option and comment on the differences, if any. (6 marks)