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:

Promoter

An individual or company responsible for organizing, financing, or sponsoring an event, project, or business venture, often prior to its creation.

Unsecured Promissory Note

A financial agreement for borrowing money that does not require collateral from the borrower.

Total Book Value

The net value of a company's assets found on its balance sheet, calculated by subtracting total liabilities from the total assets.

Corporate Promoter

An individual or entity involved in establishing a company or raising capital for it before its incorporation.