Zolar Corp

Multiple Choice

Zolar Corp. The following data pertains to Zolar Corp., a manufacturer of ball bearings (dollar amounts in millions) :
Assume that Zolar is a potential leveraged buyout candidate. Assume that the buyer intends to put in place a capital structure with that has 70 percent debt with a pre tax borrowing cost of 14 percent and 30 percent common equity. Compute the revised equity beta for Zolar based on the new capital structure.

A) 1.24
B) 4.77
C) 4.34
D) 3.91