A firm's capital structure is currently all equity with an unlevered beta of 0.73. Taxes =...

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A firm's capital structure is currently all equity with an unlevered beta of 0.73. Taxes = 25%. Beta of debt = 0. a. Scenario 1: Now the capital structure changes from 100% equity to 70% equity and 30% debt. What is the new equity beta? b. Scenario 2: Now the capital structure changes from 100% equity to 40% equity and 60% debt. The new tax rate = 15%. What is the new equity beta? Assume the following scenario of firm XYZ: market value of stock = $14 million, total value of debt = $9 million, Equity beta = 1.9, risk-free rate = 5.32%, expected market return =12.7%, taxes = 0%, cost of debt = 11.57%. a. Based on the above information, what is the expected risk premium? b. What is the Expected return on equity? c. What is the Weighted Average Cost of Capital? A firm's capital structure is currently all equity with an unlevered beta of 0.73. Taxes = 25%. Beta of debt = 0. a. Scenario 1: Now the capital structure changes from 100% equity to 70% equity and 30% debt. What is the new equity beta? b. Scenario 2: Now the capital structure changes from 100% equity to 40% equity and 60% debt. The new tax rate = 15%. What is the new equity beta? Assume the following scenario of firm XYZ: market value of stock = $14 million, total value of debt = $9 million, Equity beta = 1.9, risk-free rate = 5.32%, expected market return =12.7%, taxes = 0%, cost of debt = 11.57%. a. Based on the above information, what is the expected risk premium? b. What is the Expected return on equity? c. What is the Weighted Average Cost of Capital?

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Lets break down your questions step by step Scenario 1 a To calculate the new equity beta after changing the capital structure to 70 equity and 30 deb... View the full answer