Find wizards unlevered beta

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Unlevered beta and Hamada equation - Wizards Motors has $10 million in assets, which were financed with $3 million of debt and $7 million in equity. Wizard's beta is currently 1.4 and its tax rate is 30 percent.

a. Use the Hamada equation to find Wizards' unlevered beta, βU.

b. Using the unlevered beta that you found in part a., calculate a new levered beta, βL, if the company changes its debt/equity ratio to .8

c. Using the levered beta that you found in part b. if the risk-free rate = 3% and if the expected return in the market = 7%, calculate the required return on equity for the company.

d. Using the required return on equity that you found in part c. and an interest rate on the company debt of 6%, calculate the company WACC.

Reference no: EM133062544

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