A firm is considering a project that is virtually risk-free. The company has a beta of...
A firm is considering a project that is virtually risk-free. The company has a beta of 1.3 and a debt-equity ratio of .4. The appropriate discount rate to use in analyzing this project is:
Select one:
a. Zero.
b. The firm’s latest WACC.
c. The cost of equity capital.
d. The U.S. Treasury bill rate.
e. An adjusted WACC based on a beta of 1.0.
Homework Answers
d. The U.S. Treasury bill rate.
The appropriate discount rate to use in analyzing this project is the Treasury bill rate.
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A firm is considering a project that is virtually risk-free. The
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Globex Corp. is an all-equity firm, and it has a beta of 1. It is
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debt. The firm’s cost of debt will be 10%, and it will face a tax
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What will Globex Corp.’s beta be if it decides to make this
change in its capital structure?
a)1.40
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c)1.26
d)1.54
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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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