XYX Inc is evaluating a project. XYX intends to use 20% debt in funding the project. XYX
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XYX Inc is evaluating a project. XYX intends to use 20% debt in funding the project. XYX identifies 5 comparable companies with the following “equity betas” and “debt/equity” ratios. While the comparable companies have varying marginal tax rates XYZ’s marginal tax rate is 25%.
XYZ’s levered beta for the project (or project beta) is closest to:
A) 1.35
B) 1.24
C) 1.55
D) 1.47
Transcribed Image Text:
Company |Equity BetaDE Ratio Marginal Tax Rate 1.38 1.65 2.11 1.54 1.83 0.25 0.55 0.75 0.50 0.60 25% 30% 35% 30% 30%
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D 147 Average Equity Beta of Comparable Companies 138165211154183 5 1702 Average DE Rat...View the full answer
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Related Book For
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin
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