can you help solve the following I found something online to

can you help solve the following. I found something online to show but I dont think I am doing it right.

Company has an unlevered beta of 1.10. The firm currently has no debt, but is considering changing its capital structure to be 30% debt and 70% equity. If its corporate tax rate is 40%, what is the levered beta?

Solution

t = tax rate D = debt E = Equity Levered Beta = Unlevered Beta [1+(1-t)D/E] = 1.3829

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