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Assume that Expansion Ltd is a diversified company that is considering an expansion project in a mining division. The company has a target debt-equity ratio
Assume that Expansion Ltd is a diversified company that is considering an expansion project in a mining division. The company has a target debt-equity ratio of 1:2 and this ratio will not be affected by the new project. The company's manager has identified Dig-it-out Ltd as a company with the same business risk as the new project (equity beta of 1.5). Dig-it-out has a debt-equity ratio of 1:3. What is the beta estimate of Expansion Ltd?
A. 1.69 B. 1.12 C. 1.5 D. 1.75
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