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A comparable firm (in a comparable business) has an equity beta of 2.5 and a debt/equity ratio of 2. The debt is almost risk free. Estimate the beta for your equity if projects have constant betas, but your firm will carry a debt/equity ratio of 1/2.

(Hint: To translate a debt-toequity ratio into a debt-to-asset ratio, make up an example.)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91991359

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