The following table lists possible rates of return on Compton Technologys stock and debt, and on the

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The following table lists possible rates of return on Compton Technology’s stock and debt, and on the market portfolio. The corporate tax rate is 35 percent. The corresponding probabilities are also listed.

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a. What is the beta of Compton Technology debt?

b. What is the beta of Compton Technology stock?

c. If the debt-to-equity ratio of Compton Technology is 0.5, what is the asset beta of Compton Technology?

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Corporate Finance With Powerweb

ISBN: 9780072503630

6th Edition

Authors: Stephen A. Ross

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Question Posted: May 27, 2024 02:11 AM

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The following table lists possible rates of return on Compton Technologys stock and debt, and on the

Question:

State Probability Return on Equity (%) Return on Return on Debt (%) the Market (%) 1 0.1 3% 8% 5% 234 2 0.3 8 8 10 0.4 20 10 15 4 0.2 15 10 20

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Corporate Finance With Powerweb

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