Determine the beta of the common stock

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Reference no: EM1373151

Question: J Hennessy Corporation is entirely financed through common stock and has a beta of 1.2. The stock has a value earnings multiple of ten and is priced to offer a 10% expected rate of return. The company decides to repurchase half of common stock and substitute an equal value of debt. Suppose that the debt yields a risk-free 5%.

a. Determine the beta of the common stock after the refinancing?
b. Determine the beta of the debt?
c. Determine the beta of the entire company (stock plus debt) after the refinancing?
d. Determine the required return on the common stock after the restructuring?

Reference no: EM1373151

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