Question: Consider this case: Globo-Chem Co. currently has a capital structure consisting of 30% debt and 70% equity. However, Globo-Chem Co.'s CFO has suggested that the

Consider this case: Globo-Chem Co. currently has a capital structure consisting of 30% debt and 70% equity. However, Globo-Chem Co.'s CFO has suggested that the firm increase its debt ratio to 50%. The current risk-free rate is 3.5%, the market risk premium is 7%, and Globo- Chem Co.'s beta is 1.25. If the firm's tax rate is 25%, what will be the beta of an all-equity firm if its operations were exactly the same? 0.95 0.81 Now consider the case of another company: 1.14 0.90 0%, and its tax rate US Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of is 25%. It currently has a levered beta of 1.25. The risk-free rate is 3.5%, and the risk premium on the mar 0.95 V. US Robotics Inc
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