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A firm recently overhauled its capital structure by replacing debt with equity. Before the overhaul, it had 20% equity and 80% debt in its capital

A firm recently overhauled its capital structure by replacing debt with equity. Before the overhaul, it had 20% equity and 80% debt in its capital structure. Its equity beta was 1.8. After the overhaul, it has 50% equity and 50% debt in its capital structure. The corporate tax rate is 35%.


What is the firm's equity beta after the change?


What will be the firm's equity beta if it gets rid of all debt?

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