Brad's Boat Company,a company in the 40% tax bracket,has riskless debt in its capital structure which makes up 30% of the total capital structure,and equity is the other 70%. The beta of the assets for this business is .9 and the equity beta is:

Question

Quizplus · Accepted Answer

To find the equity beta, we can use the following formula:

Equity Beta = Asset Beta * [1 + (1 - Tax Rate) * (Debt / Equity)]

Plugging in the numbers, we get:

Equity Beta = 0.9 * [1 + (1 - 0.4) * (0.3 / 0.7)] = 1.13

Therefore, the answer is C) 1.13.

Brad's Boat Company,a Company in the 40% Tax Bracket,has Riskless