Question
The company expects FCF of $250,000 for the foreseeable future. The company has an unlevered beta of 0.85. The company has 250,000 outstanding shares. The
The company expects FCF of $250,000 for the foreseeable future. The company has an unlevered beta of 0.85. The company has 250,000 outstanding shares. The company faces a corporate tax rate of 27 percent. The company's stock price is $13.16 per share. For your analysis, you use a risk free rate of 2.5% and an equity risk premium of 6%. Your task is to analyze a capital structure that calls for 70% equity and 30% debt. The company will issue bonds at 2.8% and use the proceeds to repurchase equity. What is the beta levered at the proposed capital structure?
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