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Tems11 [23]
3 years ago
13

Hartman Motors has $18 million in assets, which were financed with $6 million of debt and $12 million in equity. Hartman’s beta

is currently 1.3, and its tax rate is 35%. Use the Hamada equation to find Hartman’s unlevered beta, .
Mathematics
1 answer:
Zinaida [17]3 years ago
6 0

Answer:

0.9811

Step-by-step explanation:

Hartman Motors' data:

Debt (D) = $6 million

Equity (E) = $12 million

Tax rate (T) = 0.35

Levered beta (βL) = 1.3

According to the Hamada equation:

\beta_L =\beta_U[1+(1-T)\frac{D}{E}]

Applying the given data:

1.3 =\beta_U[1+(1-0.35)\frac{6}{12}]\\\beta_U=0.9811

Hartman’s unlevered beta is 0.9811.

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Coordinates of vertices of rectangle A B CD are A(1,11), B(3,1).

Equation of line AB is

\frac{y-1}{x-3}=\frac{1-11}{3-1}

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So equation of AB is

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So equation of line, containing line segment AD is

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