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Century 21 Accounting Multicolumn Journal

Century 21 Accounting Multicolumn Journal

11th Edition

ISBN:9781337679503

Author:Gilbertson

Publisher:Gilbertson

Chapter17: Financial Statement Analysis

Section: Chapter Questions

Problem 4AP

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Levered beta estimation
Suppose that a benchmark company is identified is 30 percent funded by debt. By contrast, the weight of debt in the
subject company's capital structure is only 45 percent. The benchmark's beta is estimated at 1.4.
a. What is the unlevered beta of the benchmark company?
Number
Round your answer to two decimals
b. What is the levered beta of the subject company?
Number
Round your answer to two decimals

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