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I have just gone through the revision lecture. Please can you you explain how to calculate formula backwards.
Dec 10 Q1 CJ Co Part (c) I could not get 1.43 for CJs Equity Beta.I assume from your question that you have managed to get the asset beta = 1.216
We now need to calculate the equity beta, using CJ’s gearing which is equity 180M and debt 45M
The formula is Ba = Be Ve / (Ve + Vd (1 – T))
So………1.216 = Be*180 / (180 + 45*0.7)
1.216 = Be*180 / 211.5
1.216 * 211.5 / 180 = Be
So Be = 1.429
Hope that helps 🙂
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