The firmrsquos unlevered asset beta is 077 book and market


The firm’s unlevered (asset) beta is 0.77. Book and market values are equal. The firm has $40 million of debt, 5% interest rate, and $60 million of equity outstanding. The market risk premium is 4%.The firm is considering refinancing by selling bonds to repay the old debt and repurchase stock. The new debt will be issued in the amount of $50 million, paying interest at a rate of 10%. What will the firm’s unlevered (asset) beta be after refinancing?

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Financial Management: The firmrsquos unlevered asset beta is 077 book and market
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