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Author Question: Assume that the firms gain from leverage according to the Miller model is $175,880. If the effective ... (Read 398 times)

Sadjam2

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on: Aug 7, 2023

Question 1

Ang Enterprises has a levered beta of 1.2, its capital structure consists of 45% debt and 55% equity, and its tax rate is 35%. What would Ang’s beta be if it used no debt; that is, what is its unlevered beta?

◦

0.69


◦

0.78


◦

0.83


◦

0.90



Question 2

Assume that the firm’s gain from leverage according to the Miller model is $175,880. If the effective personal tax rate on stock income is Ts= 22%, what is the implied personal tax rate on debt income if the following is true? 

EBIT = $200,000, rd = 13%, Tc = 33%, Debt = $600,000, rsU = 17%.


◦

25.52%


◦

26.07%


◦

26.85%


◦

27.30%

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by Sadjam2 on Aug 7, 2023

swagmaster69

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Reply #1 on: Aug 7, 2023
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Sadjam2

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Reply 2 on: Aug 7, 2023
Thanks for the timely response, appreciate it

LVPMS

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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