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Unformatted text preview: company on google finance) Total Debt = 9.83 Billion B L = B U [1 + (1-T) (D/E)] 1.7 = B U [1 + (.6)(1.105)] Unlevered Beta = 1.022 D. Unlevered Portfolio Beta .25(.1258) + .25(.6158) + .25(.5484) + .25(1.022) = .578 E. Levered Portfolio Beta .25(.18) + .25(.71) + .25(1.04) + .25(1.7) = .9075 F. The results are clearly different. The differences are due to partly the tax rate, but more due to the debt to equity ratio. A company with more debt is going to be more volatile, have increased risk, and also potential for higher return. Levered Beta, in this portfolio, has a higher beta....
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