Asked by David Thibodeaux-Benoit on Jul 13, 2024
Verified
ABC Co.has an asset beta of 1.05 and a debt beta of 0.8.Target debt-to-equity (D/E) ratio is 0.6.With no taxes,what is the equity beta?
A) 1.20
B) 1.05
C) 0.90
D) 0.65
Asset Beta
A measure of the sensitivity of a particular asset's returns to the returns of the overall market, indicating its risk relative to the market.
Equity Beta
A measure of the volatility, or systematic risk, of an individual stock in comparison to the market as a whole.
Debt Beta
A measure of the risk associated with the debt portion of a company’s capital structure, compared to the market as a whole.
- Calculate the equity beta in a given capital structure and understand its implications.
Verified Answer
Learning Objectives
- Calculate the equity beta in a given capital structure and understand its implications.
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