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Alibaba has issued zero-coupon debt due in 4 years with a face value of $1000 billion which is now traded for $750 billion. Alibaba is
Alibaba has issued zero-coupon debt due in 4 years with a face value of $1000 billion which is now traded for $750 billion. Alibaba is planning to reinvest all its earnings without paying any dividend. Suppose Alibaba currently has a market value of $400 billion and the risk-free rate is 5.13%. The implied volatility is 25%.
(a) If Alibaba's current equity beta is 1.2, estimate the unlevered beta.
(b) Estimate the beta of debt.
(a) If Alibaba's current equity beta is 1.2, estimate the unlevered beta.
(b) Estimate the beta of debt.
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a To estimate the unlevered beta we can use the following formula Unlevered Beta Equity Beta ...
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Corporate Finance Core Principles And Applications
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
6th Edition
1260571122, 978-1260571127
