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Smith Inc. is considering a project that has different risk than their normal operations. Smith Inc. has a tax rate = 39 %, a beta
Smith Inc. is considering a project that has different risk than their normal operations. Smith Inc. has a tax rate = 39%, a beta = 4.5 and a before tax cost of debt = 6%. This new project will be financed using a D/E ratio = 0.7. A pure-play firm has been identified that has a beta = 1.2; D/E ratio = 1 and a tax rate = 30%. Calculate the estimated beta for this project.
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