Question

IDX Tech is looking to expand its investment in advanced security systems. The project will be financed with equity. You are trying to assess the value of the investment, and must estimate its cost of capital. You find the following data for a publicly traded firm in the same line of business:
Debt Outstanding (book value, AA-rated) . $400 million
Number of shares of common stock ...... 80 million
Stock price per share ............. $15.00
Book value of equity per share ......... $6.00
Beta of equity ............... 1.20

What is your estimate of the project’s beta? What assumptions do you need to make?



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  • CreatedAugust 06, 2014
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