Type 3 Aquisition-Makonis(12/13) and Pursuit Co(6/11)

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May 27, 2016 at 12:42 am #317372
Anonymous
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Hi John

Why are the asset beta’s merged differently in these two questions. Makonis(12/13) uses equity alone to determine the weighting whereas Pursuit Co(6/11) uses the value of the whole company debt and equity to weight the asset beta’s together?

Thank you
May 27, 2016 at 8:06 am #317423
John Moffat
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You are correct that the examiner has not been consistent (and would therefore have to allow either).

There is perhaps more logic in using the equity because it is equity that carries the risk.
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