Debt RatioBetaCost of Equity
70 2.2013.21
80 3.3718.44
90 6.7433.46
The levered betas are estimated using the levered beta
equation outlined earlier:
Toestimatethecostofdebt,wefirstrelatesyntheticratingsto
interestcoverageratiosanddefaultspreadsandcostsofdebt
based on a risk-free rate of 3.41%:
Thefollowingtablesummarizesthesyntheticrating,default
spread,andcostofdebtforTitanCementateverydebtratio
from 0% to 90%: