Explain the meanings of business risk and financial risk

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Reference no: EM131942989

a. Using the M&M Proposition II without taxes and security market line, we can derive the relationship among equity beta, asset beta, and capital structure. Write out this formula.

b. Using this formula, explain the meanings of business risk and financial risk.

c. Explain, in words, the relationship among business risk, financial risk, and the cost of equity.

Reference no: EM131942989

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