held firm, you do not have access to the necessary data. If you want to estimate a beta for DUC, will have to work with some comparable firm data. Calculate the unlevered betas for each of you the four basic comparable firms shown below. (Hint: Be sure to adjust for the respective tax rates given.) Comparable Firms Sales Levered Total Тах ($ Mill) Beta Debt Ratio Rate
held firm, you do not have access to the necessary data. If you want to estimate a beta for DUC, will have to work with some comparable firm data. Calculate the unlevered betas for each of you the four basic comparable firms shown below. (Hint: Be sure to adjust for the respective tax rates given.) Comparable Firms Sales Levered Total Тах ($ Mill) Beta Debt Ratio Rate
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
Related questions
Question
What is the unlevered beta for each of the four comparable firms? Additionally, estimate an equally-weighted and sales-weighted average unlevered beta.
Transcribed Image Text:a) You are interested in estimating a beta for Digital Universe Company. Since they are a privately
held firm, you do not have access to the necessary data. If you want to estimate a beta for DUC,
you will have to work with some comparable firm data. Calculate the unlevered betas for each of
the four basic comparable firms shown below. (Hint: Be sure to adjust for the respective tax rates
given.)
Comparable Firms
Sales
Levered
Total
Таx
($ Mill)
Debt Ratio
Beta
1.45
1.33
Rate
Judy in the Sky, Inc.
Yellow Submarine, Ltd.
Eleanor Rigby, Co.
Hold My Hand, LLC
54.86
22.0%
25%
312.29
27.0%
35%
18.90
1.12
1.23
32.0%
30%
75.35
461.40
45.0%
28%
Expert Solution
Step 1
Beta shows market risk and unlevered beta eliminates effect of debt and shows risk only with presence of equity component in capital structure.
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