what should be the answere??
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Cass’s D/E = 1.6 and Levered Beta = 1.2
We need to deleverage this to get the business risk. Thus, Cass’s
unlevered Beta = (Beta) / (1 + (D/E)(1-t)) = 1.2 / (1 + (1.6*0.7)) = 0.566
Thus, to get Jay’s Beta, we need to re-leverage this with Jay’s D/E:
Levered beta = Unl Beta * (1 + (D/E)(1-t)) = 0.566 * (1 + (2 * 0.7)) = 1.36
Thus, answer is C.
is other any difference between adjusted and unadjusted Equity beta??
Yes , unadjusted equity beta does not consider the project risk whereas adjusted equity beta takes into account the project risk .
how to calculate that??