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noname [10]
4 years ago
10

. El Capitan Foods has a capital structure of 36% debt and 64% equity, its tax rate is 35%, and its beta (leveraged) is 1.4. Bas

ed on the Hamada equation, what would the firm’s beta if it used no debt, i.e. what is its unleveraged beta?
Business
1 answer:
almond37 [142]4 years ago
5 0

Answer:

The firm's unleveraged beta is 1.0251

Explanation:

Hamada's equation  is used to separate the financial risk of a levered firm from its business risk.

The Hamada equation:

Bu= Bl/(1 + (1 − T)(D/E))

Bl = 1.4

wd = 0.36

Tax rate = 35%

D/E = wd / (1 – wd) = 0.5625 = 56.25%

= 1.4/ (1+(1-0.35)(0.5625))

=1.4/ 1 + (0.65)(0.5625)

=1.4/1.36

= 1.0251

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4 years ago
The jones company has just completed the third year of a​ five-year macrs recovery period for a piece of equipment it originally
tankabanditka [31]
Using the straight line method

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7 0
3 years ago
Tang Company accumulates the following data concerning raw materials in making its finished product: (1) Price per pound of raw
Nataly_w [17]

Answer and Explanation:

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6 0
4 years ago
Angela's monthly disposable income is ​$2928. She has monthly expenses of ​$ 2664 ​(including recreational expenses of ​$379​) a
Rus_ich [418]

Answer:

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Explanation:

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3 years ago
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