Homework Answers
The levered beta Or Equity beta is 4th of the options given, ie., 1.1688
Details of calculation as follows:
![4 Bu 0 1 A B C D E F 1 Levered Beta can be calculated using the formula Be=Bu.[1+(1-t)*(D/E)] 2 Where Bu= Unlevered beta, Be=](http://img.homeworklib.com/questions/f3d51960-7411-11ea-b1b2-210201508a64.png?x-oss-process=image/resize,w_560)
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If Thimmes Corp. had no debt in its capital structure, its unlevered beta would be 0.55....
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Globex Corp. has a capital structure that consists of 35% debt and 65% equity. The firm's current beta is 1.10, but management wants to understand Globex Corp's market risk without the effect of leverage. If Globex Corp. has a 45% tax rate, what is its unlevered beta? 0.68 0.77 0.85 0.98 Now consider the case of another company: US Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before tax cost of debt is...
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Globex Corp. is an all-equity firm, and it has a beta of 1. It is considering...
Globex Corp. is an all-equity firm, and it has a beta of 1. It is
considering changing its capital structure to 65% equity and 35%
debt. The firm’s cost of debt will be 10%, and it will face a tax
rate of 25%.
What will Globex Corp.’s beta be if it decides to make this
change in its capital structure?
a)1.40
b)1.47
c)1.26
d)1.54
US Robotics Inc. has a current capital structure of 30% debt
and 70% equity. Its current...
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11. Determining the optimal capital structure Understanding the optimal capital structure Review this situation: Universal Exports...
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Chargent has a capital structure of 40% debt and 60% common equity? The company's tax rate...
Chargent has a capital structure of 40% debt and 60% common equity? The company's tax rate is 25%. Their stock has a beta of 1.4. What is the company's unlevered beta? Calculate the company's levered beta if they changed their capital structure to 20% debt and 80% common equity.
Understanding the optimal capital structure Review this situation: Universal Exports Inc. is trying to identify its...
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Globex Corp. has a capital structure that consists of 35% debt and 65% equity. The firm's current beta is 1.10, but management wants to understand Globex Corp's market risk without the effect of leverage. If Globex Corp. has a 45% tax rate, what is its unlevered beta? 0.68 0.77 0.85 0.98 Now consider the case of another company: US Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before tax cost of debt is...
Globex Corp. has a capital structure that consists of 40% debt and 60% equity. The firm's current beta is 1.10, but management wants to understand Globex Corp.'s market risk without the effect of leverage. If Globex Corp. has a 40% tax rate, what is its unlevered beta? 0.91 0.75 0.79 0.71 Now consider the case of another company: U.S. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 6%,...
Globex Corp. is an all-equity firm, and it has a beta of 1. It is
considering changing its capital structure to 65% equity and 35%
debt. The firm’s cost of debt will be 10%, and it will face a tax
rate of 25%.
What will Globex Corp.’s beta be if it decides to make this
change in its capital structure?
a)1.40
b)1.47
c)1.26
d)1.54
US Robotics Inc. has a current capital structure of 30% debt
and 70% equity. Its current...
U.S. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 8%, and its tax rate is 35%. It currently has a levered beta of 1.15. The risk-free rate is 3.5%, and the risk premium on the market is 7.5%. U.S. Robotics Inc. is considering changing its capital structure to 60% debt and 40% equity. Increasing the firm's level of debt will cause its before-tax cost of debt to increase...
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Understanding the optimal capital structure Review this situation: Universal Exports Inc. is trying to identify its optimal capital structure. Universal Exports Inc. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio EPS DPS Stock Price 30% 40% 50% 60% 70% 7096 1.25 0.55 36.25 6096 1.40 0.60 37.75 50% 1.60 0.65 39.50 40% 1.85 0.75 38.75 30% 1.75 0.70 38.25 Which capital structure shown in the preceding table is Universal Exports Inc. 's optimal...
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