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Hi
the calculation in the answer assumes that Jupiter has debt of 13.65% and not 12%. i am puzzled
my calc (29m /29m + (3480x.6))1.5 = 1.39925Book answer 1.3865…there are no rounding issues. As normal i must assume I have missed something, please help
But the answer doesn’t assume debt of 13.65 anywhere!
Debt is 12% and therefore equity is 88%
Therefore the asset beta = 1.5 x (88 / (88 + (12 x 0.6))) = 1.3865
of course, i took the 29m equity and took 12% of that as debt…it was quite close but not perfect
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