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Dima020 [189]
3 years ago
11

The Boat Company has a capital structure of 30 percent riskless debt and 70 percent equity. The assumed tax rate is 23 percent.

If the asset beta is .9, what is the equity beta?
Business
1 answer:
mash [69]3 years ago
7 0

Answer: 0.68

Explanation:

Using the measures given, the equity beta can be calculated as:

Equity beta = Asset beta * (1 + (1 - Tax rate) * (Debt/Equity)

= 0.9 * ( 1 + ( 1 - 23%) * (30% / 70%)

= 1.593 * 0.3/0.7

= 0.68

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