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QUESTION
ABC Corp. currently uses no debt and its beta is 1. Further, ABC's CFO is considering moving to a capital structure with 40% debt. Assume the...
ABC Corp. currently uses no debt and its beta is 1.20. Further, ABC's CFO is considering moving to a capital structure with 40% debt. Assume the company's current ROE is 10.0%, its tax rate is 35.0%, the risk free rate and equity risk premium are currently 4.0% and 6.5%, respectively. What would its levered beta be if this revised capital structure were adopted?
