What is the unlevered equity beta

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1. Firm has debt beta of 0.20 and an equity beta of 3.18. If the debt-value ratio is 42%, what is the unlevered equity beta?

2. In private debt markets, credit analysis rarely involves any explicit attempt to estimate the value of the company's equity. True False

3. "Unavoidable risk" is that which cannot be "diversified away" by merely holding a portfolio of many different securities. True False

4. At year-end 2525 the company has Total assets of $6,400 financed by Debt of $2,900 and Stockholders’ equity of $3,500 . For 250 common shares outstanding, the equity price-to-book ratio at year-end 2525 is 1.20. During 2526, the company expects an asset turnover ratio (= Salest ÷ Total assetst-1 ) of 1.7 and an operating margin (= (Sales – operating expenses) ÷ Sales ) of 7.3%. Interest charges will equal 7% of Debt. Corporate taxes equal 34% of taxable income and the payout ratio always is 50%. Your analyst tells you that at year-end 2526 the company price-to-earnings ratio will equal 11.8.

What is the shareholders’ rate of return for year 2526?

a. 19.0% b. 14.3% c. 15.7% d. 20.9% e. 17.3%

Reference no: EM132068599

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