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The company NEW is about to be listed in the stock market. The target capital structure of this company is to have the same amout
The company NEW is about to be listed in the stock market. The target capital structure of this company is to have the same amout of Debt and Equity (i.e. D/E=1 or D/V=50% ), in market value terms. The beta debt of company NEW is estimated to be 0.20. We know that the operations of the company have the same risk that the average of the sector and that the corporate tax rate is 35%. Using the data in the following table, which refers to other firms in the same sector, compute the beta equity for company NEW after its listing in the stock exchange. Hint: use the average of the betas of the three companies and be careful to distinguish asset betas from equity betas
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