Sloan is acquiring a manufacturing system from Park Inc and considering to makes its own division....

 

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Sloan is acquiring a manufacturing system from Park Inc and considering to makes its own division. Sloan has found that Park's equity beta is 1.3, ratio of equity to debt is 1.5; and given Park's debt beta, the before tax interest rate on park's, Inc's debt is 7%. Sloan will finance this division with a debt/asset of 30%. The interest rate on debt financing for this division is 6%. Sloan tax rate = 6%. Sloan's tax rate = 36%. The risk-free rate = 4% and the market premium (i.e. Rm-Rf)= 8%. What is this new division's 1. debt beta 2. assets beta 3. cost of equity 4. weighted average cost of capital Sloan is acquiring a manufacturing system from Park Inc and considering to makes its own division. Sloan has found that Park's equity beta is 1.3, ratio of equity to debt is 1.5; and given Park's debt beta, the before tax interest rate on park's, Inc's debt is 7%. Sloan will finance this division with a debt/asset of 30%. The interest rate on debt financing for this division is 6%. Sloan tax rate = 6%. Sloan's tax rate = 36%. The risk-free rate = 4% and the market premium (i.e. Rm-Rf)= 8%. What is this new division's 1. debt beta 2. assets beta 3. cost of equity 4. weighted average cost of capital

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