medium · Principles of Finance cost-of-capital-structure
A private company has an identical business risk to a public comparable with a levered beta of 1.20. The public peer has a Debt-to-Equity (D/E) ratio of 0.40 and a tax rate of 25%.
If the private company intends to operate with a D/E ratio of 1.00 and faces the same tax rate, what is its relevered beta using Hamada's equation?
- 0.92
- 1.61
- 1.43
- 2.10
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