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Suppose a firm's business operations are such that they mirror movements in the economy as a whole very closely; that is, the firm's asset beta
Suppose a firm's business operations are such that they mirror movements in the economy as a whole very closely; that is, the firm's asset beta is 1.0. Find the equity beta for this firm for debt-equity ratios of 0, 1.7, 6.3, and 26. (Do not round intermediate calculations. Round your answers to 1 decimal place, e.g., 32.1.) Note from Instructor: There is no hint video for this question. However, you can find the answers very easily by using BE-BA(1+D/E). Since you are given asset beta (BA) of 1 in the question, you put this, together with the D/E ratio in each part of the question and solve for the cosrresponding unknown equity beta (BE).
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