Question
Given the information below on peer companies A-D, calculate the beta for company E if it has net debt/equity of 0.65 and a tax rate
Given the information below on peer companies A-D, calculate the beta for company E if it has net debt/equity of 0.65 and a tax rate of 35%.
| Company | Beta | Net debt / equity | tax rate |
| A | 1.25 | 1.15 | 35% |
| B | 1.45 | 1.48 | 35% |
| C | 1.32 | 1.23 | 35% |
| D | 1.08 | 0.95 | 35% |
Group of answer choices
0.97
1.03
1.05
1.02
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To calculate the beta for company E we can use the formula for levered beta BetaE BetaU 1 1 tax rate ...
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Step: 3
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College Mathematics For Business Economics, Life Sciences, And Social Sciences
Authors: Raymond Barnett, Michael Ziegler, Karl Byleen, Christopher Stocker
14th Edition
0134674146, 978-0134674148
