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please explain how the current unleveraged beta was caculated below. The example when typed in caculator isnt giving me the same answer. 6. AB Company
please explain how the current unleveraged beta was caculated below. The example when typed in caculator isnt giving me the same answer.
6. AB Company has a debt-equity ratio (D/E) of 0.6, and its current leveraged beta (BL) is 1. If the company changes its debt-equity ratio to 0.4, what would be AB Company's new le )? The company's current unleveraged beta (Bu) is calculated as follows: Bu = Bu[1 + (1 - T)(D/E)] => 1.5 = By [1 + (1 - 0.4)(0.6)] => Bu = 1.103 New leveraged beta (Bi') is Bi' = Bu[1 + (1 - T)(D/E)] = 1.103 [1 + (1 -0.4)(0.4)] = 1.368 Step by Step Solution
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