The Beta of an All Equity Firm Is 1

question 47

Multiple Choice

The beta of an all equity firm is 1.2. If the firm changes its capital structure to 50% debt and 50% equity using 8% debt financing, what will be the beta of the levered firm? The beta of debt is 0.2. (Assume no taxes.)

• A) 1.2
• B) 2.2
• C) 2.4
• D) None of the above

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Definitions:

Discrimination

Unfair or prejudicial treatment of individuals or groups based on characteristics such as race, gender, age, or sexual orientation.

Workplace Bullying

It refers to repeated, unreasonable actions of individuals (or a group) directed towards an employee (or a group of employees), which are intended to intimidate, degrade, humiliate, or undermine; or which create a risk to the health or safety of the employee(s).

Surprise Meetings

Unplanned or unannounced meetings, which can be used as a tactic for various purposes, including audits or to catch someone off guard.