Question: a. Use the estimates in Table 12.3 to estimate the debt beta for each firm (use an average if multiple ratings are listed). b. Estimate

a. Use the estimates in Table 12.3 to estimate the debt

beta for each firm (use an average if multiple ratings are listed).

a. Use the estimates in Table 12.3 to estimate the debt beta for each firm (use an average if multiple ratings are listed).

b. Estimate the asset beta for each firm.

c. What is the average asset beta for the industry, based on these firms?

23. In mid-2015, Cisco Systems had a market capitalization of $130 billion. It had A-rated debt of $25 billion as well as cash and short-term investments of $60 billion, and its estimated equity beta at the time was 1.11.

a. What is Ciscos enterprise value?

b. Assuming Ciscos debt has a beta of zero, estimate the beta of Ciscos underlying business enterprise.

22. Consider the following airline industry data from mid-2009 Market Total CapitalizationEnterprise Company Name Delta Air Lines (DAL) Southwest Airlines (LUV) JetBlue Airways JBLU) Continental Airlines (CAL) (Smm)Value (Smm) 4,938.5 4,896.8 1,245.5 1,124.0 Equity Beta 2.04 0.966 1.91 1.99 Debt Ratings 17,026.5 6,372.8 3,833.5 4,414.0

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