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Category > Business & Finance Posted 07 Jun 2017 My Price 11.00

The following table lists possible rates of return on Compton Technology’s stock

The following table lists possible rates of return on Compton Technology’s stock and debt, and on the market portfolio. The corporate tax rate is 35 percent. The corresponding probabilities are also listed.

State

Probability

Return on
Equity (%)

Return on
Debt (%)

Return on
the Market (%)

1

0.1

3%

8%

5%

2

0.3

8

8

10

3

0.4

20

10

15

4

0.2

15

10

20

a. What is the beta of Compton Technology debt?

b. What is the beta of Compton Technology stock?

c. If the debt-to-equity ratio of Compton Technology is 0.5, what is the asset beta of Compton Technology?

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Status NEW Posted 07 Jun 2017 07:06 AM My Price 11.00

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