Hamada equation


You are the financial manager of a firm with a market value debt ratio (debt-to-value) of 0.5 and a cost of equity of 18.08 percent. The risk-free rate is 8.0 percent and the required rate of return on the market is 15.0 percent. Assume the tax rate is 40 percent. What is the beta of an unlevered firm in the same risk class as your firm?

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Finance Basics: Hamada equation
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