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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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3 years ago
Suppose the current price of a good is $130. At this price, the quantity supplied is 125 units, and the quantity demanded is 165
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Answer:

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Explanation:

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So we have a shortage of -40 units.

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3 years ago
Use the In the News to answer three questions
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Answer:

2%

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when price is $1000:

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yield=$20/$800=2.5%

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3 years ago
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3 years ago
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