Question: ABC software is trying to establish its optimal capital structure. It currently has 30% debt and 70% equity However, the firm CEO believes that the

ABC software is trying to establish its optimal capital structure. It

ABC software is trying to establish its optimal capital structure. It currently has 30% debt and 70% equity However, the firm CEO believes that the firm should use more debt. The risk free rate is 3% and the market risk premium is 598 The firm's tax rate is 35% and the cost of equity is 10%, as determined by the CAPM Assume that the firm changed its capital structure to 40% debt and 60% equity How much should be the firm's levered stock beta with the new capital structure? Enter your answer in the following format 123 Hint #1: Answer is between 1.3 and 1 88

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