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Your firm has a debt-to-asset ratio of 26% and a beta of 0.75. The firm faces a corporate tax rate of 21%. You are considering

Your firm has a debt-to-asset ratio of 26% and a beta of 0.75. The firm faces a corporate tax rate of 21%. You are considering a recapitalization to increase the debt-to-asset ratio to 42%. Use the Hamada Relationship to estimate the betas of the unlevered firm and at the new higher-debt capital structure.

What is the unlevered beta?

What is the beta at the new capital structure?

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