Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

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%: