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Unformatted text preview: Intercept  1.18% (11.50) = 7.19% Solving for the intercept, Intercept = 7.19% + 1.18% (1.5) = 6.60% Problem 3 0.70 (Raw Beta) + 0.30 (1.00) = 1.70 Raw Beta = 2.00 Range on Beta = 1.652.35 Problem 4 Current Beta = 1.20 Assets 100 Equity 100 Unlevered Beta = 1.20 ! There is no debt After the transaction, Assets 100 Debt 40 Equity 60 Debt/Equity Ratio = 40/60 = 0.67 New Beta = 1.20 (1 + (10.4)(0.67)) = 1.68 Assets Liabilities Assets Liabilities...
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 Summer '10
 Aswath

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