Question
In: Finance
Consider a company subject to a corporate tax rate of 0.4. Ifthe company has a...
Consider a company subject to a corporate tax rate of 0.4. If the company has a debt ratio of 0.7, and an unleveraged beta of 0.7, what is the company's leveraged beta?
Solutions
Expert Solution
debt ratio=0.7
debt/asset=0.7
1-debt/asset=1-0.7
equity/asset=0.3
so debt to equity (D/E)=0.7/0.3=2.3333
leveraged beta=0.7*(1+(1-0.4)*2.3333)
=1.68
jeff jeffy answered 1 year agoRelated Solutions
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