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The Boat Company has a capital structure of 30 percent riskless debt and 70 percent equity. The assumed tax rate is 23 percent. If the asset beta is .9, what is the equity beta?

User Ekim Boran
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1 Answer

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Answer: 0.68

Step-by-step explanation:

Using the measures given, the equity beta can be calculated as:

Equity beta = Asset beta * (1 + (1 - Tax rate) * (Debt/Equity)

= 0.9 * ( 1 + ( 1 - 23%) * (30% / 70%)

= 1.593 * 0.3/0.7

= 0.68

User Timegalore
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