El Capitan Foods has a capital structure of 35% debt and 65% equity, its tax rate is 25%, and its beta (leveraged) is 1.45. Based on the Hamada equation, what would the firm's beta be if it used no debt, i.e., what is its unlevered beta, bu? a. 0.61 b. 1.15 c. 1.03 d. 1.28 e. 0.94

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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El Capitan Foods has a capital structure of 35% debt and 65% equity, its tax rate is 25 %, and its beta (leveraged) is
1.45. Based on the Hamada equation, what would the firm's beta be if it used no debt, i.e., what is its unlevered beta,
bU? a. 0.61 b. 1.15 c. 1.03 d. 1.28 e. 0.94
Transcribed Image Text:El Capitan Foods has a capital structure of 35% debt and 65% equity, its tax rate is 25 %, and its beta (leveraged) is 1.45. Based on the Hamada equation, what would the firm's beta be if it used no debt, i.e., what is its unlevered beta, bU? a. 0.61 b. 1.15 c. 1.03 d. 1.28 e. 0.94
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