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Nodebt Inc. is a firm with all-equity financing. Its equity beta is 0.80. The Treasury bill...

Nodebt Inc. is a firm with all-equity financing. Its equity beta is 0.80. The Treasury bill rate is 4%, and the market risk premium is expected to be 6%.

a. What is Nodebt’s asset beta? (Round your answer to 2 decimal places.)

b. What is Nodebt’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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Answer #1

Part A:

Incase of All Equity financing, Equity Beta and Asset beta both are same.

Thus Asset Beta is 0.80

Part B:

WACC: Risk free rate + Beta [ Market Risk Premium ]

= 4% + 0.8 [ 6% ]

= 4% + 4.8%

= 8.8%

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