Question
An analyst gathers the following information for Firm A and Firm B. Use this information to compute the industry unlevered beta and the appropriate beta
An analyst gathers the following information for Firm A and Firm B. Use this information to compute the industry unlevered beta and the appropriate beta for each company for use in the WACC. Assume that 1) 99 percent of the industry's total revenue are from Firm A and B, 2) the debt beta and tax for both firms are zero.
Firm A: CAPM beta = 0.7; debt-to-equity ratio = 0.4
Firm B: CAPM beta = 1.2; debt-to-equity ratio = 2.0 1.
The unlevered beta for business is_____ . (Round to the nearest hundredth.)
2. The unlevered beta for firm A is _______. (Round to the nearest hundredth.)
3. The unlevered beta for firm B is _______. (Round to the nearest hundredth.)
4. The levered beta (a.k.a. equity beta) for firm A is_______ . (Round to the nearest hundredth.)
5. The levered beta (a.k.a. equity beta) for firm B is _______. (Round to the nearest hundredth.)
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