Optimal Capital structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rete of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero-growth firm and pays out all of its earnings as dividends. The firm's EBIT is 516 million, and it faces a 25% federal-plus-state tax rate. The market risk premium is 4%, and the risk-free rate is 6%. BEA is considering increasing its debt level to a capital structure with 40% debt, based on market values, and repurchasing shares with the extra money that it borrows. BEA will have to retire the old debt in order to issue new debt, and the rate on the new debt will be 11%, BEA has a beta of 1.2 . a. What is BEA's unievered beta? Use market value D/S (which is the same as wa/ws) when unlevering. Do not round intermediate calculations. Round your answer to two deeimal places. b. What are BEA's new be wa 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 answer of \$1.234 million should be entered as 1.234, not 1,234,000. Round your answer to three decimal places. million Optimal Capital structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rete of 7%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero-growth firm and pays out all of its earnings as dividends. The firm's EBIT is 516 million, and it faces a 25% federal-plus-state tax rate. The market risk premium is 4%, and the risk-free rate is 6%. BEA is considering increasing its debt level to a capital structure with 40% debt, based on market values, and repurchasing shares with the extra money that it borrows. BEA will have to retire the old debt in order to issue new debt, and the rate on the new debt will be 11%, BEA has a beta of 1.2 . a. What is BEA's unievered beta? Use market value D/S (which is the same as wa/ws) when unlevering. Do not round intermediate calculations. Round your answer to two deeimal places. b. What are BEA's new be wa 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 answer of \$1.234 million should be entered as 1.234, not 1,234,000. Round your answer to three decimal places. million
