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2 years ago

What is the equity beta for a firm with asset beta equal to 0.9, and D/E ratio of 0.4, and tax rate equal to 35%?

Business

1 answer:

NNADVOKAT [17]2 years ago

3 0

Answer:

the equity beta of the firm is 1.134

Explanation:

The computation of the equity beta is shown below:

Equity beta is

= Asset beta × [1 + (1 - tax rate) × Debt-equity ratio]

= 0.9 × [1 + (1 - 0.35) × 0.4]

= 0 9 × 1.26

= 1.134

Hence, the equity beta of the firm is 1.134

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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Therefore, when the company purchases equipment at $44,280 with annual depreciation is $7,440, then the equipment's book value comes out to be $36,840 at the year-end.

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Answer

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Financial advantage from further processing $31

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