A company is financed for 30% of its capital with debt and the rest with equity. debt

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A company is financed for 30% of its capital with debt and the rest with equity. debt is risk free, so it’s beta is B=0 and its cost is risk free rate rf. Equity has a beta of Be=2

1. What is the firms asset beta.

2. Asume CAPM is correct. What is the cost of capital for the firm? Assume risk free interest of 5% and market risk premium of 6%

Related Book For answer-question

Fundamentals Of Corporate Finance

ISBN: 9780135811603

5th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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Posted Date: Feb 09, 2024 08:01 AM

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A company is financed for 30% of its capital with debt and the rest with equity. debt

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Fundamentals Of Corporate Finance

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