Question
Pandit Swan Inc. (a major weapons manufacturer) has a capital structure with $10 billion in equity and $6 billion in debt. Its tax rate is
Pandit Swan Inc. (a major weapons manufacturer) has a capital structure with $10 billion in equity and $6 billion in debt. Its tax rate is .30; its levered beta is 1.5; the riskless rate is .02 and the expected equity risk premium is .06
What is its unlevered beta?
| 0 | ||
| 1.06 | ||
| 1.5 | ||
| 1 | ||
| 1.36 |
Pandit Swan Inc. (a major weapons manufacturer) has a capital structure with $10 billion in equity and $6 billion in debt. Its tax rate is .30; its levered beta is 1.5; the riskless rate is .02 and the expected equity risk premium is .06
The equation that describes the relationship between its levered beta and debt-equity ratio is
| L = 1.06+0.74 B/S
| ||
| L = 1+0.8 B/S | ||
| L = 1.5+1.05 B/S | ||
| L = 1.36+0.95 B/S
|
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