1. An all-equity firm has a beta of .85. Assume the beta of debt is equal to the risk-free beta. If the firm changes to a debt-equity ratio of 40 percent debt its equity beta would be ____ and if it changes its debt-equity ratio to 50 percent is equity beta would be _____. rev: 03_23_2015_QC_CS-11572 1.417; 1.275 .567; .850 1.190; 1.275 1.190; 1.700 1.417; 1.700

2. The capital budget forecast for the Santano Company is $725,000. The CFO wants to maintain a target capital structure of 40% debt and 60% equity, and the company is estimated to earn a net income of $600,000. If the company follows the residual dividend policy, how much cash dividend can be distributed, and what will be its dividend payout ratio?