Question

Sisyphean Bolder Movers Incorporated has $10 billion debt, a total equity capitalization of $50 billion, and a beta of 2.0. Included in Sisyphean's assets are $22 billion in cash and risk-free securities. Using the formula you derived for the relationship between unlevered and levered beta calculate Sisyphean's unlevered beta (assets beta) considering the fact that Sisyphean's debt is risk-free. (Hint: in your formula use Net Debt = Debt - Cash)

Answer 1

the unlevered beta is 2.632

Step-by-step explanation:

The computation of the unlevered beta is shown below:

= Levered Beta ÷ (1 + (Debt - Cash) ÷ Equity)

= 2 ÷ (1 + (10-22) ÷ 50)

=2.632

hence, the unlevered beta is 2.632

We simply applied the above formula so that the correct value could come