Valuation

The following two questions from exam practice kit are very similar.
The only difference lies in “Chambers wishes to undertake an APV approach for investment appraisal.”
Why Q171 needs to de-gear and re-gear? Meanwhile, Q173 can directly use the equity beta?

Thanks,
Kenneth

Q171
Chambers has a debt : equity ratio of 1:2 by market values and an equity beta of 0.9. Debt is
assumed to be risk free and has a pre?tax cost of 2% per annum. The expected return on
the market portfolio is 8% and corporation tax is 30%.
Chambers wishes to undertake an APV approach for investment appraisal.
What is the ungeared cost of equity for Chambers to use in such an evaluation?

!173
Fonte has a debt : equity ratio of 1:2 by market values and an equity beta of 0.9. Debt is
assumed to be risk free and has a pre?tax cost of 2% per annum. The market risk premium is
8% and corporation tax is 30%.
What is Fonte’s geared cost of equity?