medium · Principles of Finance cost-of-capital-structure
A public comparable company has an equity beta of 1.20, a debt-to-equity ratio of 0.50, and a tax rate of 25%. A private target firm intends to maintain a debt-to-equity ratio of 1.00.
Using Hamada's equation and assuming the same tax rate, what is the relevered beta for the target?
- 0.87
- 1.80
- 1.53
- 2.40
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