Problem $15-10$

Optimal Capital Structure with Hamada

values, and repurchasing shares with the extra money that it borrows. BEA will have to retire the old debt in order to issue new debt, and the rate on the new debt will be $9\%.$ BEA has a beta of $1\mathrm{.}0.$

a$.$ What is BEA $\text{'}$s unlevered beta? Use market value $\frac{D}{S}($which is the same as $\frac{W}{W})$ when unlevering. Round your answer to two decimal places.

b$.$ What are BEA's new beta and cost of equity if it has $35\%$ debt? Do not round intermediate calculations. Round your answers to two decimal places.

Beta

Cost of equity

c$.$ What are BEA's WACC and total value of the firm with $35\%$ debt? Do not round intermediate calculations. Round your answer to two decimal places.

$Q_{\%}$

million