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vazorg [7]
3 years ago
14

A firm has an equity beta of 1.2, the risk-free rate is 3.4 percent, the market return is 15.7 percent, and the pretax cost of d

ebt is 9.4 percent. The debt-equity ratio is .47. If you apply the common beta assumptions, what is the firm's asset beta
Business
1 answer:
Alik [6]3 years ago
5 0

Answer:

0.82

Explanation:

Calculation to determine the firm's asset beta

Using this formula

Firm's asset beta=Equity beta/(1+/D/E)

Let plug in the formula

Firm's asset beta=1.2/(1+0.47)

Firm's asset beta=1.2/1.47

Firm's asset beta=0.816

Firm's asset beta=0.82 (Approximately)

Therefore the firm's asset beta is 0.82

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<em>e. concept testing.</em>

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sineoko [7]

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