A corporation’s securities have the following betas and market values:
Beta Market Value ($)
Debt 0.1 100000
Preferred 0.4 200000
Common 1.5 100000
Calculate the following figures given a riskless rate of 10% and market risk premium of 5%:
a. Discount rates for each security
b. The asset beta for the corporation
c. The weighted average cost of capital
d. The discount rate for the unlevered assets.
