This preview shows page 1. Sign up to view the full content.
Unformatted text preview: ?
How How do we define equity? What is Midland’s current debt/equity ratio? 7 Question 3: Midland’s Target Debt / Equity Ratio
Question What is the target debt/equity ratio? Does the difference with the current B/S ratio
matter? Which should you use? Question 3: WACC calculations – cost of equity
Question What is the beta? Unlevered beta = asset beta
Unlevered βU = βS
B 1 + ( 1 − TC ) S Now use target B/S to obtain levered beta Question 3: WACC calculations – cost of equity
based on CAPM
based What is the risk-free rate? What is th...
View Full Document
This document was uploaded on 01/15/2014.
- Fall '14