- This topic has 3 replies, 2 voices, and was last updated 6 months ago by
John Moffat.
John Moffat.Viewing 4 posts - 1 through 4 (of 4 total)
-
Posts
-
humai
- Topics: 710
- Replies: 233
- ☆☆☆☆
Sir in this case why they have multiplied Elfu Co component asset beta with 0.25 and Elfu Co asset beta of other activities with 0.75?
John Moffat
- Topics: 57
- Replies: 49601
- ☆☆☆☆☆
According to the question, 75% of Elfu’s equity is in ‘other activities’ and so 25% is in ‘component production’. It is being assumed sensibly that it is the equity that is carrying the risk.
humai
- Topics: 710
- Replies: 233
- ☆☆☆☆
Instead of equity can we also assume debt carrying the risk and so use 20% and 80%?
John Moffat
- Topics: 57
- Replies: 49601
- ☆☆☆☆☆
No. In theory debt is risk free. It is equity that carries the risk.
humai
John MoffatViewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.