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Anwers are already there. Just please help me to show work 5. Hartman Motors has $16 million in assets, which were financed with $4 million
Anwers are already there. Just please help me to show work
5. Hartman Motors has $16 million in assets, which were financed with $4 million of debt and $12 million in equity. Hartman's beta is currently 1.15, and its tax rate is 35%. Use the Hamada equation to find Hartman's unlevered beta, bu. Do not round intermediate calculations. Round your answer to two decimal places. a 1.00 *b. 0.95 c. 0.65 d. 0.98 e. 1.06 I 6. Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 20% debt and 80% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, rRF, is 3%; the market risk premium, RPM, is 5%; and the firm's tax rate is 40%. Currently, SSC's cost of equity is 13%, which is determined by the CAPM. What would be SSC's estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Do not round intermediate calculations. Round your answer to two decimal places. a. 15.62% *b. 16.91% c. 17.69% d. 15.00% e. 10.06% Step by Step Solution
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