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3 years ago

9

Assume that we are in the MM world. The beta of an all-equity firm is 1.4. Suppose the firm changes its capital structure to 40

percent debt and 60 percent equity. What is the equity beta of the levered firm

1 answer:

balu736 [363]3 years ago

8 0

Answer:

2.3

Explanation:

Levered Beta = Unlevered Beta x (1+D/E)

D/E = Debt-to-Equity Ratio

1.4 x (1 + 04 / 0.6) = 1.4 x 1.667 = 2.3

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Explanation:

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NB: please check the attached document for complete work.

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