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Find the new beta if changed to using a capital structure

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Problem 1: ABC Company has a beta of 1.2. EBIT is 100. They currently have no debt. Find the new beta if they changed to using a capital structure that used 30% debt and 70% equity. The tax rate is 35%. B(L)= B(U)*((1+w(d)/w(s)*(1-t)) =1.2*(1+(30/70)*(1-.35) =1.2*.928571429 =1.114285714

Reference no: EM132770395

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