Globex Corp. currently has a capital structure consisting of 35% debt and 65% equity. However, Globex Corp.s CFO has suggested that the firm increase its debt ratio to 50%. The current risk-free rate is 3.5%, the market risk premium is 7%, and Globex Corp.s beta is 1.15.

If the firms tax rate is 45%, what will be the beta of an all-equity firm if its operations were exactly the same?

Now consider the case of another company: