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An analyst gathers the following comp set consisting of Firm A and Firm B . Estimated debt beta for each firm equals 0 . 2

An analyst gathers the following comp set consisting of Firm A and Firm B.
Estimated debt beta for each firm equals 0.2.
Firm A: CAPM beta =0.8; debt-to-equity ratio =0.5
Firm B: CAPM beta =1.4; debt-to-equity ratio =2.5
All debt is perpetual, no new issuances or debt retirements are planned.
a. Using the information to compute the industry unlevered beta.
b.Find WACC for a similar firm C with debt-to-equity ratio of 1?

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