Apple, Inc. is trying to estimate a cost of capital for each of its three divisions: software, hardware and services, which respectively account for 20 percent, 65 percent and 15 percent of the company's total assets. Using comparable companies, Apple's management has already found asset betas of 1.5 and 2.2 for its software and hardware divisions. However, there are no comparable companies to use for its services division. Please answer the below question assuming the company as a whole maintains a constant debt-to-value ratio of 0.25, has an equity beta of 2.5 and would like to use a constant debt-to-value ratio of 0.4 when estimating the cost of capital for its services division. Note: you should assume that Apple's debt beta equals zero in your answer. 

What is the unlevered beta of Apple, Inc.?

Answer rating: 100% (QA)

To calculate the unlevered beta of Apple Inc we need to first find the weighted average asset beta for the software and hardware divisions Then we can ... View the full answer