cbrisk_2

1538 asset for company b 12766 asset for company c

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Unformatted text preview: ⎝ ⎠⎦ ⎣⎝ Because many U.S. corporations whose stock's returns are readily available have more than one line Example: Levering and unlevering betas Calculate the asset beta for each of the following companies: Company Marginal tax rate Debt Equity βequity Company A 40% $100 $200 1.5 Company B 30% $100 $400 1.5 Company C Solution: βasset for βasset for βasset for 40% $100 $200 1.0 Capital budgeting & risk, a reading prepared by Pamela Peterson Drake Company A = 1.1538 Company B = 1.2766 Company C = 0.7692 10 of business, finding an appropriate pure-play company may be difficult. Care must be taken to identify those that have lines of business similar to the project's. Try it! Asset betas Calculate the asset beta for each of these companies: Company 3M Amazon.com Sprint Nextel Walt Disney Company Yahoo! Tax rate 35% 35% 35% 35% 35% Debt $10.33 billion $3.45 billion $49.54 billion $29.95 billion $2.08 billion Equity $55.51 billion $16.18 billion $70.88 billion $52.90 billion $47.13 billion βequity 0.90 1.70 1.15 1.35 1.90 Note: Tax rate is assumed. Sourc...
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This note was uploaded on 02/07/2014 for the course MIS 304 taught by Professor Mejias during the Spring '07 term at Arizona.

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