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Up1
Greetings everyone,
I’m on reading 36 – Cost of Capital, example 13 in the Corporate Finance-Portfolio Management CFAI books.
Do you have any idea how the beta is 1.28 for the fourth answer?
I understand the formula would be .90*(1+(1-.36)(X)…I’m having a hard time finding what X is.
Thank you very much.
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Up3
You nearly have it.
you need to find the asset beta.
when d/d+e = .4
for every dollar .4 = d, which means .6 = e
Asset B= .9 [1+ (1-.36)(.4/.6)] = 1.28
i believe you were taking .4/1.4 instead of .4/.6
hope this helps,
Ron
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Up0
Thank you very much rSparks!
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