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What is Sopelco's levered equity beta? Sopelco was a private company and so had no way to easily discem the beta of its equity. But
What is Sopelco's levered equity beta?
Sopelco was a private company and so had no way to easily discem the beta of its equity. But Sopelco participated in the aluminum forging industry where there were a few competitors that were publicly traded. Unfortunately, each of the competitors had considerably different debt-to-total capital levels than Sopelco, whose Debt-to-Total Capital target was 25%. Nonetheless, with the following data, Sopelco was sure that it could calculate its own beta. Aluminum Fabrication Liteco Strong Co RecyclableCo ($ 000s) Sales $350,000 $193,000 $110,000 MV of MV of Debt Equity $45,000 $178,000 $25,000 $100,000 $10,000 $85,000 Enterprise Quoted Value B $223,000 1.40 $125,000 1.51 $95,000 1.24 Marginal Tax Rate 21% What is Sopelco's levered Equity Beta? (Hint: Make sure that when you find the industry average, you weight the components by the respective enterprise values.) Step by Step Solution
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