Globex Corp. is an all-equity firm, and it has a beta of 1. It is considering changing its capital structure to 65% equity and 35% debe. The frm's cost of debt will be 6%, and it will foce a tax rate of 25%. What will Gobex Comp.' beta be it it decides to moke this change in its capital structure? Now consider the case of another company: US Robotics Inc. has a current copital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 6%, and its tax rate is 25\%. It currentiy has a levered beta of 1.10. The risk-free rate is 2.5%, and the risk premium on the market is 7.5%. US Roboticr Inc. Is considering changing its capital structure to 60% debt and 409 equity. Increasing the firm's level of debt will cause its before-tax cost of debt to increase to 8%. First, solve for US Robotics Inc:s unlevered beta. Use US Robotics Incis unievered beta to solve for the firm's levered beta with the new capital structure. Use US Robotics Inci's levered beta under the new cepital structure, to solve for its cost of equity under the new capital structure. What will the fimis weighted average cost of copital (WACC) be if it makes this change in its capital structure? 7.92% 6.93% 9.9045 7.43% What will Globex Corp.'s beta be if it decides to make this change in its capital structure? Now consider the case of another company: US Robotics inc. has a current capital structure of 30% debt and 70% equity. Its curre is 25%. It currentiy has a levered beta of 1.10. The risk-free rate is 2.5%, and the risk 1.54-tax cost of debt is 6%, and its Inc. is considering changing its capital structure to 60% debt and 40% equity. Increasing the firm's level of debt will cause its be cost of debt to increase to 8%. First, solve for us Robotics inc.'s unlevered beta. Use us Robotics Incis unlevered beta to solve for the firm's levered beta with the new capital structure. Use us Robotics Incis levered beta under the new capital structure, to solve for its cost of equity under the new copital structure. What will the firm's weighted average cost of capital Wacc) be if it makes this change in its copitol structure? First, solve for US Robotics Inc.'s unlevered beta. Use US Robotics Inci's unlevered beta to solve for 0.91 's levered beta with the new capital structure. Use US Robotics Inc:'s levered beta under the new structure, to solve for its cost of equity under the new capital structure. What will the firm's weighted average cost of capit 1.00 C) be if it makes this change in its copital structure? 7.9246 6.93% 9.90% 7.43% h 14- Assignment - Capital Structure and Leverage cost of debt to increase to 8%. First, solve for US Robotics Inci's unlevered beta. Use US Robotics Inci's unievered beta to solve for the firm's levered beta with the new capital structure. Use US Robotics Inci's levered beta under the new capital structure, to solve for its cost of equity under th 1.94 apital structure. What will the frrm's weighted average cost of copital (WACC) be if it makes this change in its capital struo 7.92% 6.93% 9.90% 7.43% cost of debt to increase to 8%. First, solve for US Robotics inci's unlevered beta. Use US Robotics Inc's unlevered beta to solve for the firm's levered beta with the new capital structure. Use US Robotics Incis levered beta under the new capital structure, to solve for its cost of equity under the new capital structure. What will the firm's weighted average cost of capital (WACC) be if it makes this change in its capital structure? 7,92% 6.93% 9.90% 7.43%
