What is the value of Beta Corporation? What is the market value of Beta Corporation's equity? How much will it cost to purchase 20 percent of each firm's equity? Assuming each firm meets its earnings estimates, what will be the dollar return to each position in part (d) over the next year? Construct an investment strategy in which an investor purchases 20 percent of Alpha's equity and replicates both the cost and dollar return of purchasing 20 percent of Beta equity. Is Alpha's equity more or less risky than Beta's equity? Explain. Cost of Capital Acetate, Inc. has equity with a market value of $29.5 million and value of $29.5 millions and with a market value of $8 million. Treasury bills that mature in one year yield 5 percent per year and the expected return on the market portfolio is 11 percent. The beta of the company's equality The firm pays no taxes. What is the cost of capital for an otherwise identical all-equity firm? Homemade Leverage The Veblen Company and the Knight Company are identical in every respect except that Veblen is not levered. market value of Company's 6 percent bonds is $1.4 million. Financial information for the two firms a All earnings streams are perpetuities. Neither taxes. Both firms distribute all earnings available to common stockholders immediately. An investor who can borrow at 6 percent per year wishes to purchase 5 of Knight's equity. Cao he increase his dollar return by purchasing 5 per Veblen's equality so that the initial net costs of the two the same? Given the two investment strategies in (a), which will investors choose? This process cease