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Equity beta

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Equity beta

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.
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  • November 30, 2020 at 8:25 am #597077
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    sir the equity beta that we get by using the asset beta of to-be-bought company alongside debt:equity ratio of parent company, which is forecasted to remain more or less in the same ratio, will give us total equity beta of the new entity thus created right? That’s why the new equity beta calculated by regairing is more than the original equity of the parent(before the acquisition)?

    am i correct sir?

    November 30, 2020 at 10:24 am #597105
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54829
    • ☆☆☆☆☆

    It all depends on the information in the question. If a company is acquiring a company with a higher beta then the overall beta of the company after the acquisition will be higher.

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