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Old air inc. has been operating for several years. Its market-determined beta is 2.0, its market value capital structure is 60% debt, and its federal-plus-state tax rate is 40%. The risk-free rate is 7.0% and the required rate of return on the market is 15.0%. What is old air’s asset (unlevered) beta?

a. 0.67 b. 1.05 c. 1.33 D. 1.67 E. 2.00 14)

In the previous question, what is Old air’s financial risk premium? (assume it’s enlevered beta is 1.0)

a. 0.00% b. 1.50% c. 3.33% d. 7.20% e. 10.00%

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Category:- Financial Management
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