Toyon Tech is looking to expand its investment in advanced security systems. The project will be financed with all equity. You are trying to assess the value of the investment, and must estimate its cost of capital. You find the following data for a publicly-traded firm in the same line of business.

Debt outstanding (book value, AA-rated, net of cash) -------$378 million

Number of shares of common stock--------86 million

Stock price per share----------$17.01

Book value of equity per share----------$5.06

Beta of equity---------1.22

1. By making some realistic assumptions, estimate the project's beta. Show your steps.

2. Estimate the projects cost of capital given a risk-free of 2.5% and a market expected return of 8%. Provide your answer using 2 decimal points, e.g., 5.67%.

3. Now you find that the AA-rated debt issued by the public-traded firm you used above has an average yield of 3%. Use this additional information to calculate an alternative measure of the projects cost of capital. Ignore the small default risk of AA-rated debt. Provide your answer using 2 decimal points, e.g., 5.67%.