TRAMONT Co (Pilot 2012) – Q1: Asset Beta (Ba) vs Equity Beta (Be)

Hi John,

Q1 of pilot paper states:

“Tramont Co’s quoted beta is 1.17…………it is estimated that the beta applicable to the project if it is all-equity financed will be 0.4 more than the current all-equity financed beta of Tramont Co”.

The resolution considers that 1.17 is equity beta and that beta applicable for the project is asset beta. My thought was exactly the other way around.

Could you please explain how 1.17 is not asset beta and beta applicable for the project is not equity beta in this question.