Assume that the beta of an all equity firm is 1.0, that the risk-free rate is...
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Assume that the beta of an all equity firm is 1.0, that the risk-free rate is 4 percent, and that the firm's required rate of return (using CAPM) is 10 percent. If the firm changes its capital structure to 25% debt and 75% equity, where the yield (cost) of debt is 6%, and if the tax rate is 40%, then determine what the new required rate of return on the firm's newly levered equity will be, based on CAPM. (You may assume that the beta for debt is zero.) O 11.54% 10.90% O 12.40% O 11.20% O 11.93% Assume that the beta of an all equity firm is 1.0, that the risk-free rate is 4 percent, and that the firm's required rate of return (using CAPM) is 10 percent. If the firm changes its capital structure to 25% debt and 75% equity, where the yield (cost) of debt is 6%, and if the tax rate is 40%, then determine what the new required rate of return on the firm's newly levered equity will be, based on CAPM. (You may assume that the beta for debt is zero.) O 11.54% 10.90% O 12.40% O 11.20% O 11.93%
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