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What happens to amber beta

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Question - Amber's company has Rp 50,000,000 in assets which is funded with Rp 20,000,000 debt and Rp 30,000,000 equity. Amber's current beta is 1.4 and the tax rate is 40%.

a. Using Hamada's equation, calculate the unlevered beta or bU.

b. What happens to Amber's beta when the company changes its capital structure to Rp 30,000,000 debt and Rp 20,000,000 equity?

c. What is the company's cost of capital if the company changes its capital structure to IDR 30,000,000 debt and IDR 20,000,000 equity?. (Hint: Risk free rate 6%, Cost of debt 10%, and Market risk premium 6%).

Reference no: EM133093479

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