will have a levered beta. Complete the tables below to help determine the optimal financing mix. No Debt | Low Debt Debt High Debt High Debt 1. What do yo what do you notice about the beta and cost of Weight of 1 equity as debt increases? What explains this? 1 0.8 0.2 equity weight of debt 0 0.2 10.8 0.21 tax rate 0.21 2. 0.21 What do you notice about the cost of debt as Unlevered Beta debt increases? What explains this? 1 1 Levered Beta Risk-Free MRP 2.16% 5.55% 2.16% 5.55% 2.16% 5.55% 3. What do you notice about the cost of capital as debt increases? What explains this? Cost of Equity No Debt Low Debt High Debt 4. What do you notice about the beta and cost of equity as debt increases? 1 0.8 0.2 0 0.2 0.2 0.8 weight of equity weight of debt cost of equity cost of debt tax rate 5. What do you notice about the cost of debt as debt increases? 6.00% 0 0.21 3.50% 0.21 0.21 6. What do you notice about the cost of capital as debt increases? WACC