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A company is estimating its optimal capital structure. Now the company has a capital structure that consists of 50% debt and 50% equity, based on

A company is estimating its optimal capital structure. Now the company has a capital structure that consists of 50% debt and 50% equity, based on market values (debt to equity D/S ratio is 1.0). The risk-free rate (rRF) is 3.5% and the market risk premium (rM rRF) is 5%. Currently the companys cost of equity, which is based on the CAPM, is 13.5% and its tax rate is 30%. Find the firms current leveraged beta using the CAPM

2.0

1.6

2.5

1.9

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