What are BEA's new beta and cost of equity if it has 40% debt? Do not round intermediate calculations. Round your answers to two decimal places. Beta: Cost of equity: What is BEA's WACC with 40% debt? Do not round intermediate calculations. Round your answer to two decimal places. $ tA % What is the total value of the firm with 40% debt? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.234 million should be entered as 1.234, not 1,234,000. Round your answer to three decimal places. % million
What are BEA's new beta and cost of equity if it has 40% debt? Do not round intermediate calculations. Round your answers to two decimal places. Beta: Cost of equity: What is BEA's WACC with 40% debt? Do not round intermediate calculations. Round your answer to two decimal places. $ tA % What is the total value of the firm with 40% debt? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.234 million should be entered as 1.234, not 1,234,000. Round your answer to three decimal places. % million
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![What are BEA's new beta and cost of
equity if it has 40% debt? Do not
round intermediate calculations.
Round your answers to two decimal
places.
Beta:
Cost of equity:
What is BEA's WACC with 40% debt?
Do not round intermediate
calculations. Round your answer to
two decimal places.
%
What is the total value of the firm
with 40% debt? Do not round
$
%
intermediate calculations. Enter your
answer in millions. For example, an
answer of $1.234 million should be
entered as 1.234, not 1,234,000.
Round your answer to three decimal
places.
million](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe9d9a5f0-fe4e-422d-8c50-a22c93ec0936%2F1362f1eb-dfc3-47dd-aecd-db353f5ffd89%2Fht45s8u_processed.jpeg&w=3840&q=75)
Transcribed Image Text:What are BEA's new beta and cost of
equity if it has 40% debt? Do not
round intermediate calculations.
Round your answers to two decimal
places.
Beta:
Cost of equity:
What is BEA's WACC with 40% debt?
Do not round intermediate
calculations. Round your answer to
two decimal places.
%
What is the total value of the firm
with 40% debt? Do not round
$
%
intermediate calculations. Enter your
answer in millions. For example, an
answer of $1.234 million should be
entered as 1.234, not 1,234,000.
Round your answer to three decimal
places.
million
![Optimal Capital Structure with
Hamada
Beckman Engineering and Associates
(BEA) is considering a change in its
capital structure. BEA currently has $20
million in debt carrying a rate of 8%,
and its stock price is $40 per share with
2 million shares outstanding. BEA is a
zero-growth firm and pays out all of its
earnings as dividends. The firm's EBIT is
$18 million, and it faces a 25% federal-
plus-state tax rate. The market risk
premium is 4%, and the risk-free rate is
6%. BEA is considering increasing its
debt level to a capital structure with
40% debt, based on market 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 10%. BEA has a beta of 1.2.
a. What is BEA's unlevered beta? Use
market value D/S (which is the same
as wd/ws) when unlevering. Do not
round intermediate calculations.
Round your answer to two decimal
places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe9d9a5f0-fe4e-422d-8c50-a22c93ec0936%2F1362f1eb-dfc3-47dd-aecd-db353f5ffd89%2Fusb2ufq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Optimal Capital Structure with
Hamada
Beckman Engineering and Associates
(BEA) is considering a change in its
capital structure. BEA currently has $20
million in debt carrying a rate of 8%,
and its stock price is $40 per share with
2 million shares outstanding. BEA is a
zero-growth firm and pays out all of its
earnings as dividends. The firm's EBIT is
$18 million, and it faces a 25% federal-
plus-state tax rate. The market risk
premium is 4%, and the risk-free rate is
6%. BEA is considering increasing its
debt level to a capital structure with
40% debt, based on market 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 10%. BEA has a beta of 1.2.
a. What is BEA's unlevered beta? Use
market value D/S (which is the same
as wd/ws) when unlevering. Do not
round intermediate calculations.
Round your answer to two decimal
places.
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