A company estimates the optimal capital structure. The company now has a capital structure of 20% debt and 80% equity based on market values (debt equity D/L ratio is 0.25). The risk free rate (r _RF ) is 5% and the market risk premium (r _M – r _RF ) is 6%. Currently, the company's CAPM-based cost of equity is 14% and the tax rate is 20%. 

Find the firm's current leveraged beta using CAPM

Answer rating: 100% (QA)

To find the firms current leveraged beta using the CAPM Capital Asset Pricing Model we need to calc... View the full answer