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Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6%
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6% and its million, and it faces a 25% federal-plus-state tax rate. The market risk premium is 6%, and the risk-free rate is 6%. BEA in considering in debt in order to issue new debt, and the rate on the new debt will be 10%. BEA has a beta of 0.8. a. What is BEA's unlevered beta? Use market value D/S (which is the same as wd/ws ) when unlevering. Do not round intermediate calculations. Round your answer to two decimal places. b. What are BEA's new beta and cost of equity if it has 40% debt? Do not round intermediate calculations. Round your answers to two decimal places. Beta: Cost of equity: % c. What is BEA's WACC with 40% debt? Do not round intermediate calculations. Round your answer to two decimal places. % What is the total value of the firm with 40% debt? Do not round intermediate calculations. Enter your answer in millions. For example, an 1.234 million should be entered as 1.234, not 1,234,000. Round your answer to three decimal places. \$ million
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