You have been asked to estimate the beta for a large South Korean company, with large holdings in steel and financial services. A regression of stock returns against the local market index yields a beta of 1.10, but the firm is 15% of the index. You have collected the average betas for global companies in each of the sectors, as well as the average debt equity ratios in each sector: Sector Average Regression Beta Average D/E ratio Steel 1.18 30% Financial Services 1.14 70% (The average tax rate for these firms is 40%) In the most recent period, the size of the steel business and the financial services is about 70% and 30% of the South Korean company respectively. The company also had a debt to equity ratio of 150%, and a tax rate of 30%. (a) Estimate the levered beta for the company. (6 marks) (b) If the Korean government bond rate in Won is 8%, Korea's rating is BBB (Country bonds with this rating earn a spread of 2% over the U.S. T-bond rate). The equity risk premium in Korea is 5.5%, and Korean equities are twice as volatile as Korean bonds, estimate the cost of equity for this company