MetaCompanies P$,$ and Q closely resemble division A of company X$.$ The equity betas of P and Q are $2\mathrm{.}0$ and $1\mathrm{.}8.$ The ratios of debt to equity for the two firms are $1\mathrm{.}5$ and $1\mathrm{.}25.$ The marginal tax rate is $20\%.$ Which of the following is a best estimate of division A$\text{'}$s asset beta?

a$-1\mathrm{.}38$

b$-1\mathrm{.}35$

Correct Answer

c$-0\mathrm{.}90$

You Answered

d$-1\mathrm{.}90$