(WACC, leverage, beta) Rusty-Sell, Inc., a midstate Pennsylvania recycling facility, is L = 27% debt financed. It pays corporate taxes at the rate of 35%. The firm’s (leveraged) beta is 1.45. T * = 0.21, rd = 12%, rf = 8%, and rM = 15%. Assume continuous capital struc- ture rebalancing.
a. What is Rusty-Sell’s required return to (leveraged) equity, re ?
b. What is Rusty-Sell’s WACC?
c. What is Rusty-Sell’s unleveraged required return, r ?
d. What unleveraged beta is implied by r ?