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Suppose a firm has a market beta of 0.9, is subject to an income tax rate of 35%, and has a market-value-of-debt-to-market-value-of-equity ratio of 60%.
Suppose a firm has a market beta of 0.9, is subject to an income tax rate of 35%, and has a market-value-of-debt-to-market-value-of-equity ratio of 60%. If the risk-free rate is 3% and the market risk premium is 6%. The firm intends to adopt a new capital structure that will increase the debt-to-equity ratio to 140%. Whats the projected levered beta under the new capital structure? a. 1.68 b. 0.96 c. 1.44 d. 1.24
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