Robotics Inc. has a current capital structure of 30% debt and 70% equity. Your current cost of debt before taxes is 10% and your tax rate is 35%. It currently has a leveraged beta of 1.10. the risk-free area is 2.5% and the risk premium in the market is 8%. Us Robotics Inc. is considering changing its capital structure to 60% debt and 40% equity. The increase in the company's debt level will cause the pre-tax cost of debt to rise to 12%. 1. What is Robotics Unlevered Beta? 2. Reiever US Robotics beta using the company's new capital structure. 3. Use Robotics' leveraged beta under the new capital structure to calculate its cost of capital under the new capital structure.

Answer rating: 100% (QA)

To calculate the unlevered beta we need to use the following formula Unlevered Beta Levered Beta 1 1 ... View the full answer