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John Moffat.
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Noah098
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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?
John Moffat
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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.
Noah098
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