Look back to Section 17.1. Suppose that Ms. Macbeths investment bankers have informed her that since the
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Look back to Section 17.1. Suppose that Ms. Macbeth’s investment bankers have informed her that since the new issue of debt is risky, debtholders will demand a return of 12.5%, which is 2.5% above the risk-free interest rate.
a. What are rA and rE?
b. Suppose that the beta of the unlevered stock was .6. What will βA , βE , and βD be after the change to the capital structure?
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Related Book For 
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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