El Capitan Foods Has a Capital Structure of 36% Debt

question 24

Multiple Choice

El Capitan Foods has a capital structure of 36% debt and 64% equity,its tax rate is 35%,and its beta (leveraged) is 1.40.Based on the Hamada equation,what would the firm's beta be if it used no debt,i.e. ,what is its unlevered beta,b_U?

• A) 1.03
• B) 1.29
• C) 0.80
• D) 0.88
• E) 1.15

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Definitions:

Average Collection Periods

The average number of days it takes for a business to receive payments owed by its customers.

Uncollected

Refers to funds or debts that have not been received or recovered by the due date.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Net Profit Margin

A financial metric that shows the percentage of a company's revenue that remains as net income after operating expenses, interest, taxes, and preferred stock dividends have been deducted.