A firm recently overhauled its capital structure by replacing debt with equity. Before the overhaul, it had 20% equity and 80% debt in its capital structure. Its equity beta was 1.8. After the overhaul, it has 50% equity and 50% debt in its capital structure. The corporate tax rate is 35%.

What is the firm's equity beta after the change?

What will be the firm's equity beta if it gets rid of all debt?

Answer rating: 100% (QA)

1 To calculate the firms equity beta after the change we can use the following formula Equity Beta D... View the full answer