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debt beta

This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.

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June 3, 2015 at 6:25 am #252253
tafadzwa
Member
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I don’t understand how to use debt beta in this question.
market return 10%, rf 5%, debt beta 0.3
what is Kd
ans: Kd = 5+(0.37 * (10-5)) =6.85
how do we get the 0.37
June 3, 2015 at 7:14 am #252300
John Moffat
Keymaster
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I don’t know where you found this question, but either you have copied it wrongly, or the answer is wrong!
On the figures you have given, Kd = 5 + 0.3(10-5) = 6.5%
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