Please do 3.8 part a.

Beta! Street Journal 3.7 The B coefficient of the stock of a company is 1.32. Its average market value net debt ratie is 50%. What is its unlevered B coefficient? Paper Industry Capital Structure and B Coefficients as of December 2002 (Million US$ except as noted) Levered Market Net Equity? Debe? Abitibi-Consolidated 1.14 4,374 5.770 Bowater Inc 0.70 1.928 2,278 Domar Inc 0.95 3356 2,655 International Paper Co. 0.87 16,931 11,823 Meadwestiace Corp 0.99 4,186 4,809 Packaging Corp. of America 0.35 1,874 688 Pope & Talbot, Ine. 0.70 186 226 Temple-Inland Inc. 0.93 2,149 1,772 Weyerhauser Co. 1.06 10,070 14.041 Regression of company returns on S&P 500 retums, unadjusted ?Shares outstanding times share price Book interest bearing debt minus cash and marketable securities 40 dollars Source: Companies' 10-ks und 10 Quand Deutsche Bank Securities Problems 65 38/ The previous exhibit contains estimations of coefficients, market capitalization, and net debt for a number of paper companies. a. Adjust their estimated betas for regression toward the mean (see Section 3.3) and estimate the average unlevered B coefficients. . Update the data to the present and compute the average unlevered B coefficient. 3.9 Verify the estimation of AdvPak cost of equity made in Section 3.7. Do it step by step starting from the levered B coefficients of the comparable companies 38 Debt Adguated Bu 1.14 BL o Abitibi 1.14 Equity 4,374 4 5,770 = 0.34 +066x144 = = 1.09 I (H+ $770 43747 -0.49 2 Bowater 1 3 ! 1 1 @ 1 1 1 L Avercye Bu= 7