For a levered firm where b_A = beta of assets and b_D = beta of debt, the equity beta (b_E) equals A)b_E = b_A_.. B)b_E = b_A + (D/E) × [b_A - b_D]. C)b_E = b_A + (D/(D + E)) × [b_A - b_D]. D)None of the options are correct.

Question

Quizplus · Accepted Answer

The equity beta (b_E) for a levered firm is calculated using the formula: b_E = b_A + (D/E) × [b_A - b_D], where D is the debt and E is the equity.

For a Levered Firm Where BA = Beta of Assets

For a Levered Firm Where B_A = Beta of Assets