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)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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)
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