(2) Suppose the company has announced it is going to repurchase $18,200 worth of stock. What effect will this transaction have on the equity of the firm? (2 分)

1.Assume a firm's debt is risk-free, so that the cost of debt equals the risk-free rate, Rf. Define βA as the firm's asset beta-that is, the systematic risk of the firm's assets. Define βE to be the beta of the firm's equity. Use the capital asset pricing model (CAPM) along with M&M Proposition II to show that βE =βA x (1+D/E), where D/E is the debt-equity ratio. Assume the tax rate is zero.

題組內容

(2) Suppose the company has announced it is going to repurchase $18,200 worth of stock. What effect will this transaction have on the equity of the firm? (2 分)

相關申論題

相關試卷