RDJ Inc Has an Asset Beta of 0

question 184

Multiple Choice

RDJ Inc. has an asset beta of 0.95. Its current capital structure is 60% debt, 40% equity. What is the firm's equity beta? Ignore taxes.

• A) 0.380
• B) 1.243
• C) 1.583
• D) 1.875
• E) 2.375

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Definitions:

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders, not considered when calculating earnings per share or dividend distributions.

Common Stock

A form of corporate equity ownership, representing a claim on a portion of the company's profits and a right to vote on shareholder matters.

Treasury Stock

Treasury stock consists of shares that were issued and later reacquired by the company. These shares do not pay dividends and do not have voting rights.

Par Common Stock

The nominal or face value of a share of common stock as stated in the corporate charter, which has no direct relation to the market value.