Q1 december 2012

This topic has 1 reply, 2 voices, and was last updated 13 years ago by brithel1.

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May 21, 2013 at 9:26 pm #126580
carl29
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Asset beta for the co is 0.61

Asset beta for hotel services = 0.61 x 60%

+ industry beta 0.4 x 40%
Gives beta 0.75 in the answer, surely its 0.53?

Why is it 0.75?
May 26, 2013 at 2:35 pm #127225
brithel1
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0.61=Asset Beta(hotel services)*60%+0.4*40%

Let Asset Beta (hotel servises be) x

Now ; 0.61= x*60%+0.4*40%
0.61=0.6x+0.16
0.61-0.16=0.6x
0.45=0.6x
0.45/.6=x
0.75 = x

Hope that helped Carl29
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