Subject: Financial strategy & policy Question No 4 Answer the following. iii) You have a capital structure consisting of 30% debt and 70% equity. There is an 8% yield to maturity. The risk-free rate is 5%, and the market risk premium is 6%. Using the CAPM, the cost of equity is currently 12.5%. There is 40% tax rate. (03) a) Calculate current WACC? b) Calculate the current beta on common stock? c) Calculate the beta if you had no debt in the capital structure, that is unlevered beta?
Subject: Financial strategy & policy Question No 4 Answer the following. iii) You have a capital structure consisting of 30% debt and 70% equity. There is an 8% yield to maturity. The risk-free rate is 5%, and the market risk premium is 6%. Using the CAPM, the cost of equity is currently 12.5%. There is 40% tax rate. (03) a) Calculate current WACC? b) Calculate the current beta on common stock? c) Calculate the beta if you had no debt in the capital structure, that is unlevered beta?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter16: Capital Structure Decisions
Section: Chapter Questions
Problem 3P: Premium for Financial Risk
Ethier Enterprise has an unlevered beta of 1.0. Ethier is Financed with...
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Subject: Financial strategy & policy
Question No 4
Answer the following.
iii) You have a capital structure consisting of 30% debt and 70% equity. There is an 8% yield to maturity. The risk-free rate is 5%, and the market risk premium is 6%. Using the CAPM, the
a) Calculate current WACC?
b) Calculate the current beta on common stock?
c) Calculate the beta if you had no debt in the capital structure, that is unlevered beta?
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