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    Levered Beta

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    I need to see intermediate steps and formulas.

    California Real Estate, Inc. currently is an all-equity firm, the current expected rate of return on the firm's equity is 20%, risk free rate is 5% and the market risk premium is 10%. The firm is considering a capital structure change from zero debt to a debt-to-equity ratio .5, given the corporate tax rate is 50%, what is the equity Beta under the proposed change?

    © BrainMass Inc. brainmass.com June 3, 2020, 8:51 pm ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/levered-beta-155928

    Solution Preview

    Using the CAPM equation, we first calculate the exisiting beta which will be unlevered beta
    Rate of return = Rf + ...

    Solution Summary

    The solution explains how to calculate the equity beta after a change in the capital structure.

    $2.19

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