Unformatted text preview: that Enteprise Value=Equity+Debt-Cash, then we can write the above equation as: beta u = E EV β E + D EV β d (2) Since in this case β d = 0 and since β Before u = β After u and EV Before = EV After by Modigliani-Miller, then: E Before β Before E = E After β After E The question asks for the beta of equity after the capital structure change so: E Before β Before E E After = E After β After E (3) Then, 120 * 1 . 50 120-40 = β After E (4) 1...
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This note was uploaded on 01/08/2012 for the course MS&E 245G taught by Professor Perez-gonzalas during the Fall '11 term at Stanford.
- Fall '11