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QUESTION
An all-equity firm has a beta of . Assume the beta of debt is equal to the risk-free beta.
An all-equity firm has a beta of .85. Assume the beta of debt is equal to the risk-free beta. If the firm changes to a debt-equity ratio of 40 percent debt its equity beta would be ____ and if it changes its debt-equity ratio to 50 percent is equity beta would be _____.
