Zonk Corp
the Following Data Pertains to Zonk Corp -Assume That Zonk Is a Potential Leveraged Buyout Candidate

Multiple Choice

Zonk Corp.
The following data pertains to Zonk Corp., a manufacturer of ball bearings (dollar amounts in millions) :
$\begin{array}{l}\begin{array} { l } \text { Tatal assets } \\\text { Interest-bearing debt } \\\text { Average pre-tax borrowring } \\\text { Cammon equity: } \\\text { Badk value } \\\text { Market value } \\\text { Incame tax rate } \\\text { Market equity beta }\end{array}\begin{array} { r } \$ 7460\\\$ 3652\\10.5 \%\\\\\$2950 \\\$13685 \\35\% \\1.13\end{array}\end{array}$
-Assume that Zonk is a potential leveraged buyout candidate.Assume that the buyer intends to put in place a capital structure that has 70 percent debt with a pretax borrowing cost of 14 percent and 30 percent common equity.Compute the revised equity beta for Zonk based on the new capital structure.

A) 4.35
B) 4.77
C) 4.34
D) 3.91