q49 bbs stores

[shilpamary]

bpp revision kit q49 bpp stores

why the weighted beta is found in part (b)beginning if weighting is done again with proportion option of 1 and 2?

First we found out asset beta like we always do, then weigh if any
its said that 50% of property & 50% assets are sold to RPH So that means half of properties lies within the business ie; bpp stores and other half with RPH so shouldn’t value be proportionated in half the value of property to total value of business

1)i don’t get the fifth step ie; third page(228) equity beta under two options are found out then why it cant be applied straight to capm? why there is bit of calculation again before its incorporated to capm

ba=be*.931
1.935=be*.931????

2)just tell me whether I am right in understanding this part?: we calculate asset beta as usual then as it is said it will be sold to rph and hence we assume its asset beta so found was the total value and hence weighing to proportion ??? !!!!! once that is found
asset beta of rph & bbs stores are applied in option 1 and 2 to get equity beta .Am i right or have i just confused you? 🙁

[John Moffat]

The current asset beta is the average of the asset betas of the two streams – property and retail – weighted by the relative values of them to BBS Stores. What proportions of each they might choose to sell is of no relevant to this calculation.

I am not sure which 5th step you are referring to. Once we know the equity beta, then we can calculate the relevant cost of equity.
Once we have the cost of equity, we can then calculate the relevant WACC to apply.

[Author]

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