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Find the firm''s current leveraged beta using the capm

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Reference no: EM132828254

A company is trying to estimate its optimal capital structure. Right now, the company has a capital structure that consists of 20% debt and 80% equity, based on market values (that means the debt to equity D/S ratio is 0.25). The risk-free rate (rRF) is 5% and the market risk premium (rM - rRF) is 6%. Currently the company's cost of equity, which is based on the CAPM, is 14% and its tax rate is 20%. Find the firm's current leveraged beta using the CAPM

Reference no: EM132828254

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