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Saint Louis Universal Co. has a capital structure with 30% debt (basically long-term debt) and...

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Finance

Saint Louis Universal Co. has a capital structure with 30% debt (basically long-term debt) and 70% common equity. The company does not have prefered stocks in its capital structure. The yield to maturity on the company's long term bonds is 8% and the firm estimates that its overall composite WACC is 10%. The risk-free rate of interest is 5.5%, the market risk premium is 5%, and the company's tax rate is 40%. Saint Louis Universal Co. uses the CAPM to determine its cost of equity. What is the beta on Saint Louis Universal Co.'s stock? What is the interpretation fro that beta?

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