Globo$-$Chem Co$.$ is an all$-$equity firm, and it has a beta of $1.$ It

is considering changing its capital structure to $65\%$ equity and $35\%$

debt. The firm$$s cost of debt will be $8\%,$ and it will face a tax

rate of $25\%.$What will Globo$-$Chem Co$.$s beta be if it decides to make

this change in its capital structure?$$Options: $1\mathrm{.}47,1\mathrm{.}68,1\mathrm{.}40,1\mathrm{.}54$US Robotics Inc. has a current capital structure of $30\%$ debt and

$70\%$ equity. Its current before$-$tax cost of debt is $8\%,$ and its tax

rate is $25\%.$ It currently has a levered beta of $1\mathrm{.}15.$ The risk$-$free

rate is $3\%,$ and the risk premium on the market is $7\mathrm{.}5\%.$ US Robotics

Inc. is considering changing its capital structure to $60\%$ debt and

$40\%$ equity. Increasing the firm$$s level of debt will cause its

before$-$tax cost of debt to increase to $10\%.$First, solve for US Robotics Inc.$$s unlevered beta.$$

$$Options: $0\mathrm{.}87,0\mathrm{.}78,1\mathrm{.}04,0\mathrm{.}96$Use US Robotics Inc.$$s unlevered beta to solve for the firm$$s

levered beta with the new capital structure.$$

$$Options: $1\mathrm{.}76,1\mathrm{.}67,2\mathrm{.}04,1\mathrm{.}85$Use US Robotics Inc.$$s levered beta under the new capital

structure, to solve for its cost of equity under the new capital

structure.$$Options: $13\mathrm{.}504\%,19\mathrm{.}412\%,16,880\%,15\mathrm{.}192\%$What will the firm$$s weighted average cost of capital $($WACC$)$ be

if it makes this change in its capital structure?$11\mathrm{.}30\%9\mathrm{.}61\%7\mathrm{.}91\%8\mathrm{.}48\%$

Globo$-$Chem Co$.$ currently has a capital structure consisting of $30\%$ debt and $70\%$ equity. However, Globo$-$Chem Co$.\text{'}$s CFO has suggested that the firm increase its debt ratio to $50\%.$ The current risk$-$free rate is $3\mathrm{.}5\%,$ the market risk premlum is $8\%,$ and Globo$-$Chem Co$.\text{'}$s beta is $1\mathrm{.}10.$

If the firm's tax rate is $25\%,$ what will be the beta of an all$-$equity firm if its operations were exactly the same? $q,$

Now consider the case of another company:

$q,$

US Robotics Inc. has a current capital structure of $30\%$ debt and $70\%$ equity. Its current before$-$tax cost of debt is $6\%,$ and its tax rate is $25\%.$ It currently has a levered beta of $1\mathrm{.}10.$ The risk$-$free rate is $3\mathrm{.}5\%,$ and the risk premium on the market is $8\%.$ US Robotics Inc. is considering changing its capital structure to $60\%$ debt and $40\%$ equity. Increasing the firm's level of debt will cause its before$-$tax cost of debt to increase to $8\%.q,$

First, solve for US Robotics Inc.$\text{'}$s unlevered beta. $q,$

Use US Robotics Inc.$\text{'}$s unlevered beta to solve for the firm's levered beta with the new capital structure. $$

Use US Robotics Inc.$\text{'}$s 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?

$10\mathrm{.}07\%$

$8\mathrm{.}48\%$

$10\mathrm{.}60\%$

$7\mathrm{.}95\%$