Hardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that consists of 80% equity and 20% debt and a corporate tax rate of 40%. Based on the short-term treasury bill rates the risk-free rate is 6% and the market return is 11%. Hardware Co. computed its cost of equity based on the CAPM – 12%. The company will shift its capital structure to 50% debt and 50% equity funded. 1. What is the current beta of Hardware Co.’s equity?
Hardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that consists of 80% equity and 20% debt and a corporate tax rate of 40%. Based on the short-term treasury bill rates the risk-free rate is 6% and the market return is 11%. Hardware Co. computed its
1. What is the current beta of Hardware Co.’s equity?
2. What is the unlevered beta of Hardware Co.?
3. What is the levered beta on the capital structure of 50% debt and 50% equity funded?
4. What would be Hardware Co.’s estimated cost of equity if it will shift its capital structure to 50% debt and 50% equity funded?
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Hardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that consists of 80% equity and 20% debt and a corporate tax rate of 40%. Based on the short-term treasury bill rates the risk-free rate is 6% and the market return is 11%. Hardware Co. computed its
What would be Hardware Co.’s estimated cost of equity if it will shift its capital structure to 50% debt and 50% equity funded?
by Bartleby ExpertHardware Co. is estimating its optimal capital structure. Hardware Co. has a capital structure that consists of 80% equity and 20% debt and a corporate tax rate of 40%. Based on the short-term treasury bill rates the risk-free rate is 6% and the market return is 11%. Hardware Co. computed its cost of equity based on the CAPM – 12%. The company will shift its capital structure to 50% debt and 50% equity funded.
1. What is the current beta of Hardware Co.’s equity?
2. What is the unlevered beta of Hardware Co.?
3. What is the levered beta on the capital structure of 50% debt and 50% equity funded?
4. What would be Hardware Co.’s estimated cost of equity if it will shift its capital structure to 50% debt and 50% equity funded?
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