The required rate of return on the asset of American General Inc is 12%. The average market risk premium is 9%and the risk-free rate is 4%. The companys current capital structure is 40% debt and 60% equity, the beta of its debt is 0.05 and its tax rate is 35%.

22) Assume that the correct answer to the above question is 10.00%. Calculate the cost of equity under the no tax assumption:

23) Calculate the beta of the assets:

24) If the correct answer to the above question is 1.50, calculate the beta of the equity, given taxes:

25) Assume that the correct answer to question 21 is 10.00%. Calculate the required return on equity when taxes are applicable (if not then beta is 0.9856)