Question

Delta Airlines market capitalization is $4916.6 million, total enterprise value is $16,989.3 million, and equity beta is 1.941. What is the debt beta?

A. 0 (Zero)
B. 1.941
C. Insufficient information
D. Need additional financial data

Answer 1

With only the market capitalization, total enterprise value, and equity beta provided, there is insufficient information to accurately determine the debt beta of Delta Airlines.

Step-by-step explanation:

The question is asking to determine the debt beta for Delta Airlines given their market capitalization, total enterprise value, and equity beta. Debt beta is a measure of the risk associated with a company's debt relative to the market. The equity beta provided is 1.941, which measures the risk of the company's equity relative to the market. However, to calculate the debt beta, more information on the risk and return characteristics of the firm's debt is required. Thus, based on the information provided, the answer is insufficient information to determine the debt beta.To calculate the debt beta, we can use the formula:

Betadebt = (Betaequity x Market Capitalization) / Total Enterprise Value

Substituting the given values:

Betadebt = (1.941 x $4916.6 million) / $16,989.3 million = 0.562

Therefore, the debt beta is approximately 0.562.