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How to calculate this question? b. Lune Creek is a start-up firm that is considering a public stock offering. Jim Jensen is a financial analyst
How to calculate this question?
b. Lune Creek is a start-up firm that is considering a public stock offering. Jim Jensen is a financial analyst and he is asked to evaluate Lune Creek. Jim finds a publicly traded peer company with an estimated equity beta of 1.2 and its business is similar to Lune Creek. Lune Creek's capital structure consists of 32% debt and 68% equity. The publicly traded peer company is funded 70% by debt and 30% by equity. The risk-free rate is 3%. Assume that debt is risk-less and there is no tax. Estimate the equity beta for Lune Creek. [8 marks]Step by Step Solution
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