ABC Corp. is a firm with all-equity financing. Its equity beta is .80. The Treasury bill rate is 4% and the market risk premium is expected to be 10%.
a. What is ABC’s asset (equity) beta?
b. What is its weighted average cost of capital? The firm is exempt from paying taxes.
Firm’s equity beta=0.80
Firms is all equity financed,
Solution describes the steps for calculating asset beta for all-equity financed firm. It also calculates WACC for such firm.