Answer:
the firm equity beta is 1.188
Explanation:
The computation of the firm equity beta is as follows:
In the case when the firm switches to a debt-equity ratio is 0.35,
So, the proportion of equity in total capital structure is
= 100 ÷ 135
= 0.741
Now The equity beta is
= 0.88 ÷ 0.741
= 1.188
Hence, the firm equity beta is 1.188
