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Assume that a firm will always have enough money to pay off its bonds, so the beta of its bonds is 0. (Being risk free, the rate of return on the bonds is obviously independent of the rate of return on the stock market.) Assume that the beta of the underlying assets is 2.

What would financial websites report for the beta of the firm's equity if it changes its current capital structure from all equity to half debt and half equity? To 90% debt and 10% equity?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91991100

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