Calculating unlevered beta 9. Farnwell Foods has a capital structure of 55% debt and 45% equity, its tax rate is 35%, and its levered beta is 1.

Calculating unlevered beta

9. Farnwell Foods has a capital structure of 55% debt and 45% equity, its tax rate is 35%, and its levered beta is 1.10. Based on the Hamada equation, what would the firm’s beta be if it used no debt, i.e., what is its unlevered beta, bu?

a. 0.5500

b. 0.5875

c. 0.6130

d. 0.6500

e. 0.7125

Leave a Reply