Question
you would like to estimate the unlevered beta of schwartz industries (si). si's value of outstanding equity is $400.00 million, and you have estimated its
you would like to estimate the unlevered beta of schwartz industries (si). si's value of outstanding equity is $400.00 million, and you have estimated its beta to be 1.20. si has four-year zero-coupon debt outstanding with a face value of $100.00 million, which currently trades for $75.00 million. si will pay no dividends and will reinvest all of its earnings over the next four years. the four-year risk-free interest rate is 5.130%. use the black-scholes formula to estimate the unlevered beta of the firm. (note: the volatility of the market value of si's assets is either 40%, 50%, or 60%.)
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