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Tunapuna Technologies (TT) is a privately traded firm with a target debt to value ratio of 15% and current interest rate on debt of 6%. Since the firm is privately traded, you turn to Arima Technologies (AT), TT's closest publicly traded competitor for data to estimate TT's WACC. AT has a beta of 1.5 and a debt-to-value ratio of 35%. The current risk-free rate is 3.5%, the expected market risk premium is 6.5%, and the corporate tax rate for both firms is 40%.
a) What is the "best estimate" of the equity beta for TT?
b) What is the required return on equity for TT?
c) What is the WACC for TT?
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