If Kat Corp were an all-equity firm, it would have a beta of 0. However, we know that Kat has debt-to-equity ratio of 0. The market risk premium is…
If Kat Corp were an all-equity firm, it would have a beta of 0.8. However, we know that Kat has debt-to-equity ratio of 0.50. The market risk premium is 5% and Treasury bonds yield 3%. Assume zero debt beta.