"the free-float company, a company in the 36% tax bracket, has riskless debt in its capital structure which makes up 40% of the total capital structure, and equity is the other 60%. the beta of the assets for this business is 0.8. what is the equity beta?

Equity Beta = 1.1413

Explanation:

The formula to find the asset beta is

Asset Beta = Equity Beta/(1+(1-tax rate)(Debt/Equity))

We will put the values given in the question in this formula

Asset Beta = 0.8

Tax rate = 0.36

Debt = 0.40

Equity = 0.60

0.8=Equity Beta/(1+(0.64)(0.40/0.60)

0.8=Equity Beta/1+0.4266

0.8=Equity Beta/1.4266

1.4266*0.8= Equity Beta

Equity Beta = 1.1413

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- love what you do.

- the worst thing that could happen might turn out to be the best thing that could happen.

- follow your heart and trust it knows where it's going.