Globo-chem co is an all-equit firm and it hs a beta of 1 it, Ask an Expert

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Globo-Chem Co. is an all-equit firm, and it hs a beta of 1. It is considering changing its capital structure to 65% equity and 35% debt. The firm's cost of debt will be 6%, and it will face a tac rate of 45%.

What is the company beta if it decides tomake these changes in its capital structure?

Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 6% and its tax rate is 45%. It currently has a levered beta of 1.15. The risk free rate is 2.5%, and the risk premium on the marekt is 7.5%.

It is considering changing its capital structure to 60% debt and 40% equity. Increasing the firm's level of debt will cause its before tax cost of debt to increase to 8%. Use the Hamada equation to unlever and relever the beta for the new level of debt. What will the firm's WASS be if itmakes this change in its capital structure?

Which of the following statement regarding a firm's optimal capital strucure are true? Check all that apply.

- the optimal capital structure maximizes the firm's stock price

- maximizes the firm's EPS

- minimizes the firm's cost of equity

- minimizes the firm's cost of debt

- minimizes the firm's WACC

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92403273

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