Archimedes Levers is financed by a mixture of debt and equity. Complete the following: (Enter your...

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Archimedes Levers is financed by a mixture of debt and equity. Complete the following: (Enter your re and rA answers as a per

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Answer 1

Answer #1

Market premium = 22% - 7% = 15%

rE = 7% + 15% *1.2 = 25%

rA = 25% * (1-0.65) + 9% * 0.65 = 14.6%

bD = ( 9% -7%) / (22% -7%) = 0.13

bA = 1.2 * (1-0.65) + 0.13 * 0.65 = 0.50

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Answer 2

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