LEVERAGE -
1. What legal aspect of corporate debt explains the fact that increasing your company's leverage (using more debt and less equity to finance your operations) will make your company's stock beta rise? (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM FOR EXCEL).
WEIGHTED AVERAGE COST OF CAPITAL -
2. Company Y is financed one third with debt and two thirds with equity. Company Y's expected return on equity is 12 percent and its expected return on debt is 6 percent. Company Y has a corporate tax rate of 33 percent. Calcualte Company Y's Weighted Average Cost of Capital (CACC)? (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM FOR EXCEL).