The Company X is entirely financed with common stock and has a beta of $1\mathrm{.}5.$ It is expected to generate a level, perpetual

stream of earnings and dividends. The stock has price$-$earnings ratio of $6.$ The current market price of its share is Rs LOO.

Now it is planning to repurchase. one$-$fourth of its shares and substitutes an equal value of debt in its capital structure, The

debt will be risk free at the rate of $5\%$ interest rate. The company is in SEZ and enjoys complete tax exemption under

government policy. Calculate overall cost of capital, beta of equity, and cost of equity under revised capital structure.