Henry is trying to unlever a firm's common equity beta but is struggling to do so because
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Henry is trying to unlever a firm's common equity beta but is struggling to do so because he has been told by his boss that he is not allowed to assume a debt beta equal to zero. His firm insists on using a market risk premium of 6% in all of its analysis, and the current yield on long-term U.S. government bonds is 1.9%. If the firm's cost of debt is 3%, what would be an appropriate debt beta to use for this firm?
Answer rating: 100% (QA)
To unlever a firm s common equity beta Henry needs to know the firm s debt beta Since he i...View the full answer