Author Question: Assume that the firms gain from leverage according to the Miller model is $175,880. If the effective ... (Read 310 times)

Sadjam2 · **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?

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0.69

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0.78

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0.83

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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 T_s= 22%, what is the implied personal tax rate on debt income if the following is true?

EBIT = $200,000, r_d = 13%, T_c = 33%, Debt = $600,000, r_sU = 17%.

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25.52%

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26.07%

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26.85%

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27.30%

swagmaster69 · **Reply #1 on:** Aug 7, 2023

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