Globe-Chem Co. has a capital structure that consists of 40% debt and 60% equity. The firm's...

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Globe-Chem Co. has a capital structure that consists of 40% debtand 60% equity. The firm's current beta is 1.10, but managmentwants to understand Globo-Chem Co.'s market risk without the effectof leverage. 1. If global-Chem has a 35% tax rate, what is itsunlevered beta? a. 0.81 b. 0.77 c. 0.62 d. 0.92 Now consider thiscase of another company: U.S. Robotics Inc. has a current capitalstructure of 30% debt and 70% equity. Its current before tax costof debt is 8%. and its tax rate is 35%. It curerntly has a leveredbeta of 1.10. The risk-free rate is 3% and the risk premium on themarket is 7%. U.S. Robotics Inc. is considering changing itscapital structure to 60% debt and 40% equity. Increasing the firm'slevel of debt will cause its before-tax cost of debt in increaseton 10%. 2. First solve for the U.S. Robotics Inc's unlevered beta.3. Relever U.S. Robtics Inc's beta using the firm's new capitalstructure. 4. Use U.S. Robtics Inc's levered beta under the newcapital structure, to solve for its cost of equity under the newcapital structure. 5. What will the firm's weighted average cost ofcapital be if it makes this change to its capital structure?

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Globe-Chem Co. has a capital structure that consists of 40% debtand 60% equity. The firm's current beta is 1.10, but managmentwants to understand Globo-Chem Co.'s market risk without the effectof leverage. 1. If global-Chem has a 35% tax rate, what is itsunlevered beta? a. 0.81 b. 0.77 c. 0.62 d. 0.92 Now consider thiscase of another company: U.S. Robotics Inc. has a current capitalstructure of 30% debt and 70% equity. Its current before tax costof debt is 8%. and its tax rate is 35%. It curerntly has a leveredbeta of 1.10. The risk-free rate is 3% and the risk premium on themarket is 7%. U.S. Robotics Inc. is considering changing itscapital structure to 60% debt and 40% equity. Increasing the firm'slevel of debt will cause its before-tax cost of debt in increaseton 10%. 2. First solve for the U.S. Robotics Inc's unlevered beta.3. Relever U.S. Robtics Inc's beta using the firm's new capitalstructure. 4. Use U.S. Robtics Inc's levered beta under the newcapital structure, to solve for its cost of equity under the newcapital structure. 5. What will the firm's weighted average cost ofcapital be if it makes this change to its capital structure?