What beta should allen use in evaluating this project? what, Ask an Expert

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Allen Corporation is planning to expand into the fast developing business of renting video movies. Allen has debt-to-equity ratio of 1, its pretax cost of debt is 15%, and its marginal tax rate is 40%. The Gardner Corporation is already in the video business, has a β of 1.5, debt-to-equity ratio of 0.75, and marginal tax rate of 25%. What beta should Allen use in evaluating this project? What is the required return on the project if the riskless rate is 10% and the expected return on the market is 20%?

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