Question
In: Finance
Consider a company subject to a corporate tax rate of 0.5. If the company has a...
Consider a company subject to a corporate tax rate of 0.5. If the company has a debt ratio of 0.6, and an unleveraged beta of 0.5, what is the company's leveraged beta?
Solutions
Expert Solution
Answer:
Facts:
Debt/equity= 0.6
Tax Rate= 0.5
Unlevered beta= 0.5
Calculation of levered beta:
Levered beta = Unlevered beta * (1+(1- tax rate)*(debt/equity))
= 0.5*( 1+ (1- 0.5) * (0.6))
= 0.5*(1+ 0.3)
Levered Beta =0.65
jeff jeffy answered 1 year agoRelated Solutions
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