Consider the following information based on firms that are in a single line of business: Company name A B

A

Debt beta is by default 0

Unlevered beta or Asset beta of firm =Levered beta or Equity beta /(1 +( (1-tax rate)*Debt/Equity))

Asset beta of firm A = 1.6/(1+((1-34%)*320/461))

=1.097292472

Asset beta of firm B =0.8/(1+((1-34%)*365/5186))

=0.7644880134

Asset beta of firm C =1.3/(1+((1-34%)*1447/3811))

=1.03950466

Asset beta for firm D= 0.7/(1+((1-34%)*2332/1456))

=0.3402868666

Asset beta for firm E= 1.1/(1+((1-34%)*334/314))

=0.6462839608

Asset beta of firm A is 1.0973

Asset beta of firm B is 0.7645

Asset beta of firm C is 1.0395

Asset beta for firm D is 0.3403

Asset beta for firm E is 0.6463

B

Cost of capital for firm = Risk free rate + (asset beta*market risk premium)

Cost of capital for Firm A = 5% + (1.097292472*4%)

=0.09389169888 or 9.39%

Cost of capital for Firm B  = 5% + (0.7644880134*5%)

=0.08822440067 or 8.82%

Cost of capital for Firm C = 5% + (1.03950466*6%)

=0.1123702796 or 11.24%

Cost of capital for Firm D = 5% + (0.3402868666*4%)

=0.06361147466 or  6.36%

Cost of capital for Firm E = 5% + (0.6462839608*4%)

=0.07585135843 or 7.59%

Cost of capital for Firm A is 9.39%

Cost of capital for Firm B is 8.82%

Cost of capital for Firm C is 11.24%

Cost of capital for Firm D is 6.36%

Cost of capital for Firm E is 7.59%