Consider the following historical rate of return seriesa, Ask an Expert

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Consider the following historical rate of return series:

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(a) What was IBM's equity beta over this sample period?

(b) If IBM had a debt/equity ratio of 70%, what was its asset beta? (Hint: To determine a D/A ratio, make up an example in which a firm has a 70% D/E ratio.)

(d) If HP is similar to IBM in its business but has a debt/equity ratio of 10%, what would you expect HP's levered equity beta to be? (Hint: Use the same leverage conversion trick.)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91991369

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