An All-Equity Firm Has a Beta of 0

Multiple Choice

An all-equity firm has a beta of 0.94.Assume the beta of debt is equal to the risk-free beta.If the firm changes to a debt-equity ratio of 0.35,its equity beta would be ________,and if it changes its debt-equity ratio to 0.40,its equity beta would be ________.

A) 1.269; 1.316
B) 1.269; 1.234
C) 1.190; 1.234
D) 1.190; 1.316
E) 1.234; 1.316