An unlevered firms assets have a beta of 1.10, and the firms value is $150 million. The firm plans to raise capital by issuing bonds valued at 75 million. The firms cost of debt is 6.15% and the debt will have a beta of 0. If the expected return on the market is 7.50% and the risk free rate is 2.35%.

Calculate the expected return of equity for the firm after it has added debt to its capital structure. Assume that the tax rate is 24%

Answer rating: 100% (QA)

In this Beta 110 unlevered firms value Cost of debt expected return on market 750 Risk free rate 23... View the full answer