Consider the following information for VOL, Inc. Use this information for the next $2$ problems.

current wd $0\%$ rd if wd $=40\%7\%$

current ws $100\%$ rf $4\%$

current beta $1\mathrm{.}10$ RPM $5\%$

Tax rate $25\%$

$8.$ Using Hamada's equation, calculate the levered beta if VOL recapitalizes to $40\%$ debt.

a$.1\mathrm{.}4$

b$.1\mathrm{.}5$

c$.1\mathrm{.}7$

d$.1\mathrm{.}8$

e$.2\mathrm{.}0$

$9.$ Calculate VOL's WACC if it recapitalizes to $40\%$ debt.

a$.7\mathrm{.}8\%$

b$.8\mathrm{.}6\%$

c$.9\mathrm{.}5\%$

d$.10\mathrm{.}4\%$

e$.11\mathrm{.}4\%$

UTK has the following information. Use this information for the next $2$ problems.

current wd $40\%$ rd $7\%$

current ws $60\%$ rf $4\%$

current beta $1\mathrm{.}20$ RPM $5\%$

Tax rate $25\%$

$10.$ Calculate UTK's unlevered required return on equity, rsU using the APV model.

a$.8\mathrm{.}0\%$

b$.8\mathrm{.}8\%$

c$.9\mathrm{.}7\%$

d$.10\mathrm{.}6\%$

e$.11\mathrm{.}7\%$

Suppose UTK's unlevered required return, rsU, is $9\mathrm{.}1\%($and not what you got in the previous

problem$).$ Now suppose that it recapitalizes to $60\%$ debt, and its borrowing costs remain the same as in

the previous problem. What will be its new required return on equity? Use the APV model $($and not

Hamada$)$ for levering.

a$.8\mathrm{.}4\%$

b$.9\mathrm{.}2\%$

c$.10\mathrm{.}1\%$

d$.11\mathrm{.}1\%$

e$.12\mathrm{.}3\%$