Dear,
I am currently struggling with the following question and I really hope you could help me out. In question b.2. you are being asked to calculate the unlevered cost of capital. However, this calculation includes the cost of debt and the weight of debt to the total value. Therefore, should this not be called ‘‘the levered cost of capital’’ or simply the ‘‘cost of capital’’? Similarly, In question b.1. you are being asked to calculate the unlevered beta. Altough the beta of debt is 0, I do not understand why this calculation results in the unlevered beta instead of the levered Beta.
Kind regards
Tim