Answer:
To determine the beta after the restructuring of Macrosoft Corp's balance sheet, we can use the following formula:
�
new
=
Beta
old
×
(
1
+
Tax Rate
)
×
(
Debt-to-Equity Ratio
new
)
1
+
Tax Rate
×
(
Debt-to-Equity Ratio
new
−
Debt-to-Equity Ratio
old
)
β
new
=
1+Tax Rate×(Debt-to-Equity Ratio
new
−Debt-to-Equity Ratio
old
)
Beta
old
×(1+Tax Rate)×(Debt-to-Equity Ratio
new
)
Given the information:
Beta (old) = 1.2
Debt-to-Equity Ratio (old) = 80% or 0.8
Debt-to-Equity Ratio (new) = 50% or 0.5
Tax Rate = 21%
Let's substitute these values into the formula to calculate the new beta:
�
new
=
1.2
×
(
1
+
0.21
)
×
0.5
1
+
0.21
×
(
0.5
−
0.8
)
β
new
=
1+0.21×(0.5−0.8)
1.2×(1+0.21)×0.5
�
new
=
1.2
×
1.21
×
0.5
1
+
0.21
×
(
−
0.3
)
β
new
=
1+0.21×(−0.3)
1.2×1.21×0.5
�
new
=
0.726
1
−
0.063
β
new
=
1−0.063
0.726
�
new
=
0.726
0.937
β
new
=
0.937
0.726
�
new
≈
0.7752
β
new
≈0.7752
Rounding the new beta to two decimal places, we find that the beta after the restructuring of the balance sheet for Macrosoft Corp is approximately 0.78.
Therefore, the correct option is b) 0.75.
Step-by-step explanation: