A few publicly listed home appliance manufacturing companies have the following beta, debt, and equity: Company Beta Debt Equity Apple 1.4 ₹ 2,500 ₹ 3,000 Pear 1.2 ₹ 5 ₹ 200 Grape 1.2 ₹ 540 ₹ 2,250 Tomato 0.7 ₹ 8 ₹ 300 Watermelon 1.5 ₹ 2,900 ₹ 4,000 Calculate the beta of the industry keeping in mind the publicly listed sector only, with a debt equity ratio of 25%. (Assume a Tax Rate for all companies at 35%) (Hint- One way is to compute the unlevered betas of each of the five firms and then average these unlevered betas and substitute it as the unlevered beta for a private company)
A few publicly listed home appliance manufacturing companies have the following beta, debt, and equity: Company Beta Debt Equity Apple 1.4 ₹ 2,500 ₹ 3,000 Pear 1.2 ₹ 5 ₹ 200 Grape 1.2 ₹ 540 ₹ 2,250 Tomato 0.7 ₹ 8 ₹ 300 Watermelon 1.5 ₹ 2,900 ₹ 4,000 Calculate the beta of the industry keeping in mind the publicly listed sector only, with a debt equity ratio of 25%. (Assume a Tax Rate for all companies at 35%) (Hint- One way is to compute the unlevered betas of each of the five firms and then average these unlevered betas and substitute it as the unlevered beta for a private company)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter12: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 12.4E
Related questions
Question
F2
A few publicly listed home appliance manufacturing companies have the following beta, debt, and equity:
Company |
Beta |
Debt |
Equity |
Apple |
1.4 |
₹ 2,500 |
₹ 3,000 |
Pear |
1.2 |
₹ 5 |
₹ 200 |
Grape |
1.2 |
₹ 540 |
₹ 2,250 |
Tomato |
0.7 |
₹ 8 |
₹ 300 |
Watermelon |
1.5 |
₹ 2,900 |
₹ 4,000 |
Calculate the beta of the industry keeping in mind the publicly listed sector only, with a debt equity ratio of 25%. (Assume a Tax Rate for all companies at 35%) (Hint- One way is to compute the unlevered betas of each of the five firms and then average these
unlevered betas and substitute it as the unlevered beta for a private company)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781285867977
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning