Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital...

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Finance

Optimal Capital Structure with Hamada
Beckman Engineering and Associates (BEA) is considering a changein its capital structure. BEA currently has $20 million in debtcarrying a rate of 6%, and its stock price is $40 per share with 2million shares outstanding. BEA is a zero growth firm and pays outall of its earnings as dividends. The firm's EBIT is $14.418million, and it faces a 40% federal-plus-state tax rate. The marketrisk premium is 5%, and the risk-free rate is 5%. BEA isconsidering increasing its debt level to a capital structure with30% debt, based on market values, and repurchasing shares with theextra money that it borrows. BEA will have to retire the old debtin order to issue new debt, and the rate on the new debt will be9%. BEA has a beta of 1.2.
What is BEA's unlevered beta? Use market value D/S (which is thesame as w_d/w_s) when unlevering. Round youranswer to two decimal places.
1.043 (Correct)
What are BEA's new beta and cost of equity if it has 30% debt?Do not round intermediate calculations. Round your answers to twodecimal places.
Beta
Cost of equity %
Beta of .94 incorrect
Cost of equity of 10.53 incorrect.
What are BEA’s WACC and total value of the firm with 30% debt?Do not round intermediate calculations. Round your answer to twodecimal places.
% (8.991 is incorrect)

What is the total value of the firm with 30% debt? Do not roundintermediate calculations. Enter your answer in millions. Forexample, an answer of $1.2 million should be entered as 1.2, not1,200,000. Round your answer to three decimal places.
$ million
(96.22 is incorrect)

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Optimal Capital Structure with HamadaBeckman Engineering and Associates (BEA) is considering a changein its capital structure. BEA currently has $20 million in debtcarrying a rate of 6%, and its stock price is $40 per share with 2million shares outstanding. BEA is a zero growth firm and pays outall of its earnings as dividends. The firm's EBIT is $14.418million, and it faces a 40% federal-plus-state tax rate. The marketrisk premium is 5%, and the risk-free rate is 5%. BEA isconsidering increasing its debt level to a capital structure with30% debt, based on market values, and repurchasing shares with theextra money that it borrows. BEA will have to retire the old debtin order to issue new debt, and the rate on the new debt will be9%. BEA has a beta of 1.2.What is BEA's unlevered beta? Use market value D/S (which is thesame as wd/ws) when unlevering. Round youranswer to two decimal places.1.043 (Correct)What are BEA's new beta and cost of equity if it has 30% debt?Do not round intermediate calculations. Round your answers to twodecimal places.BetaCost of equity%Beta of .94 incorrectCost of equity of 10.53 incorrect.What are BEA’s WACC and total value of the firm with 30% debt?Do not round intermediate calculations. Round your answer to twodecimal places.% (8.991 is incorrect)What is the total value of the firm with 30% debt? Do not roundintermediate calculations. Enter your answer in millions. Forexample, an answer of $1.2 million should be entered as 1.2, not1,200,000. Round your answer to three decimal places.$ million(96.22 is incorrect)