Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table.
Table 1: Information of the firms

Unlevered firm 
Levered firm 
EBIT 
10,000 
10,000 
Interest 
0 
3,200 
Taxable income 
10,000 
6,800 
Tax (tax rate: 34%) 
3,400 
2,312 
Net income 
6,600 
4,488 
CFFA 
0 
3,200 
Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5
Suppose that the firm changes its capital structure so that the debttoequity ratio is 1.0, then recalculate the systematic risk of the equity
The formula to calculate systematic risk of equity is given below:
Substitute 1.5 for systematic risk of asset, 0.34 fo...
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