If Company ABC’s current capital structure is: 25% debt, 75% equity; risk free rate of return...

If Company ABC’s current capital structure is: 25% debt, 75% equity; risk free rate of return rRF = 5%; market premium rM – rRF = 6%; tax rate T = 40%; and cost of equity rs = 14%, a. What’s the Company’s levered beta b?

b. What’s the Company’s unlevered beta bu ?

c. If the Company’s debt ratio becomes 50%, what’s Company’s new levered beta bL ?

d. What’s the Company’s new cost of equity under the changed capital structure?

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jeff jeffy answered 1 year ago

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