1. In assumption 2, they have used 1.1 as an equity beta as if coeden has sold all hotel and rent them back but actually 1.1. Still have not sold all properties isnt ?
The reason answer have used 1.1 as an equity beta is because therr are no other figures in the question to calculate asset beta of hotel services ?
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COEDEN CO DEC 2012 ADAPTED
7y ago#1They are currently partly property and partly hotel services, and their current beta is 1.1.
This is the weighted average of the beta for property and the beta for hotel services. We know the beta for property and so we can calculate the beta for hotel services.
This is a standard calculation and is all explained (with examples) in my free lectures on CAPM.
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