Tisa co. (6/12 amended) BPP TEXT Q14

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September 5, 2021 at 10:32 am #634412
reenatanna
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In the question for Tisa co, the solution mentions the asset beta of component to be 25 percent of total asset beta of elfu. It is not clear as to why they have taken 25 percent.

Is it because of the percentage of MV of equity finance?
September 5, 2021 at 10:58 am #634421
John Moffat
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Yes. It is because 75% of the equity is attributed to other activities (and therefore 25% to components), and it is assumed that it is equity that carries the risk.
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