You have just done a regression of monthly stock returns of Royal Inc., on monthly market returns

over the past five years and have come up with the following regression:

Ra $=0\mathrm{.}03+1\mathrm{.}4$ x M$.$R$.$P$.$

The variance of the stock is $50\%,$ and the variance of the market is $20\%.$ The current risk$-$free rate

is $3\%$ and the market risk premium is $8\mathrm{.}76\%.$ The stock is currently selling for $$50,$ down $$4$ over

the past year; it has paid a dividend of $$2\mathrm{.}50$ during the past year and expects to pay a dividend of

$$2$ over the next year. Royal Inc. has a tax rate of $40\%.$ The estimated return on the stock is $15\mathrm{.}26\%.$

Royal Inc. has $$100$ million in equity and $$70$ million in debt. It plans to issue $$60$ million in new

equity and retire $$30$ million in debt. Estimate the new $($levered$)$ beta.