The reason why an equity beta of a levered firm varies from the beta of its assets. Introduction: Equity beta is also termed as levered beta, and the beta of the company with financial leverage. Leverage refers to the borrowing of amount or debt to utilize for a purchase of equipment, inventory, and other assets of the company.

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Chapter 12.5, Problem 2CC

Summary Introduction

To discuss: The reason why an equity beta of a levered firm varies from the beta of its assets.

Introduction:

Equity beta is also termed as levered beta, and the beta of the company with financial leverage.

Leverage refers to the borrowing of amount or debt to utilize for a purchase of equipment, inventory, and other assets of the company.

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