FREE Trial

An analyst covering Internet start-up companies has determined that the asset beta for the sector is 1.80, the average...

This problem has been solved!
Do you need an answer to a question different from the above? Ask your question!

Question:

An analyst covering Internet start-up companies has determined that the asset beta for the sector is 1.80,
Transcribed Image Text:

An analyst covering Internet start-up companies has determined that the asset beta for the sector is 1.80, the average equity beta is 2.40, and the average marginal tax rate is 15 percent. The industry average debt-to-equity ratio is closest to:

Expert Answer:

Answer rating: 100% (QA)

We can use the formula Equity Beta Asset Beta 1 1 Tax rate De View the full answer


answer-question
Related Book For  answer-question
Equity Asset Valuation

Equity Asset Valuation

ISBN: 978-0470571439

2nd Edition

Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen

See More Books
View Solution
Create a free account to access the answer
Cannot find your solution?
Post a FREE question now and get an answer within minutes. * Average response time.
Question Details
Chapter # 7
Section: Problems
Problem: 10
Posted Date: September 24, 2023 03:01:13
See More Questions

Students also viewed these finance questions

Q:
Boris Duarte, CFA, covers initial public offerings for Zellweger Analytics, an independent research firm specializing in global small-cap equities. He has been asked to evaluate the upcoming new...
A:
16 b 1 70 2 79 and 3 44 The asset betas for Relevant ABJ and Opus are 1 70 2 79 and 3 44 respectively This can be determined by looking at the data provided 17 c 2 27 The average asset beta for the pu......
Q:
In the beginning of January 2009, Mr. L.C. Tandon, Director of Finance of Central Equipment Company (CEC) was evaluating the pros and cons of debt and equity financing for the purpose of expansion of...
A:
Question 1 Justifications for Using Debt Cost Advantage Compared to equity debt frequently has lower borrowing expenses Tax deductible interest on debt makes it an economical financing option Benefits......
Q:
Jerome Neeson is a shareholder in Gourmet Chefs Inc., a company that owns and operates a test kitchen in a large metropolitan area. The company is involved in a number of businesses, including...
A:
If Jerome is adamant in not wanting to be involved with Gou......
Q:
During the current year, Rothchild, Inc., purchased two assets that are described as follows: Heavy Equipment Purchase price, $275,000. Expected to be used for 10 years, with a residual value at the...
A:
a Depreciation is calculated on the following amount Purchase price 275 000 Plus Expenditures to pre......
Q:
Turner Company purchased 40% of the outstanding stock of ICA Company for $10,000,000 on January 2, 2011. Turner elects the fair value option to account for the investment. During 2011, ICA earns...
A:
Given Turner s election of the fair value option it would account for this investment similar to a t......
Q:
Which physical state is described as having a variable shape and variable volume?
A:
The physical state that is described as having a va......
Q:
Vale plc has the following profit-after-tax history and dividend-per-share history: Two years ago the number of issued ordinary shares was increased by 30 per cent (at the beginning of the financial...
A:
a No of shares Profit million per share This year 100 000 10......
Q:
I have two fair dice. On each die, each of the numbers (1,2,3,4,5,6) comes up with equal probability. We play the following dice game: You start with 0 points. In each round, I roll two dice. If the...
A:
a Suppose you have a score of N and decide to keep playing I throw the two dice Clearly explain why there is a probability that you lose everything Th......
Q:
Calculate the potential difference between points a and b in Figure P28.54 and identify which point is at the higher potential. 4.00 V 2.00 4.00 T120 V 10.0
A:
Using Kirchhoff s loop rule for th......
Q:
A. Differentiate between the concept of cost accumulation and accumulated costs. B. Differentiate between the cost behaviour of fixed versus variable costs.
A:
A The value obtained by adding the external value i e the value the value the price of grouping or p......
Q:
State the matching law and describe a situation to which it can be applied.
A:
The Matching Law is a principle in behavioral psychology that describes the distribution of an indiv......
Q:
What conclusion would you draw about valuation and allocation of PPE from the above information? Justify your conclusion. Fabrication Holdings Ltd (FH) has been a client of K&F for many years. You...
A:
Based on the information provided I would conclude that there is a potential for material misstatements in the valuation and allocation of FH s PPE Th......
Q:
1. Intervention (treatment) packagedefine it and give an example. 2. Discuss the use of intervention packages from the point of view of a. Scientific, applied-behavior analysis research b. Technology...
A:
This question seems to be related to principles of behavior specifically intervention packages Here......
Q:
What observations did Antoine Lavoisier make? What law did he formulate?
A:
Antoine Lavoisier a French scientist made several groundbreaking observations that revolutionized the field of chemistry His meticulous experiments an......
Q:
How did behavior traps help Dicky, the boy with autism, continue to wear his glasses and maintain his talking?
A:
The use of behavior traps in the case of Dicky a boy with autism likely involved creating situations......
Q:
Explain the mechanism of a Digital Signatures which is recognized under the Information Technology Act, 2000 and state at least two (2) of its applications
A:
Explained below is the technical aspect of the working of Digital Signatures It is recognized under the Information Technology Act 2000 which states t......
Q:
For each of the following reactions, express the equilibrium constant: a) H20 (I) H2 (g) + 02 (g) Ke = 1.0x107 b) Fe2 (g) 2F (g) Ke= 4.9 x 10-21 c) C (s) + O2 (g) d) H2 (g) + C2H4 (g) C2H6 (g) Ke =...
A:
Equi librium Cosfart is erpressed as the eqilibriun Con......
Q:
Lawrence McKibben is preparing a valuation of QuickChange Auto Centers, Inc. McKibben has decided to use a three - stage FCFE valuation model and the following estimates. The FCFE per share for the...
A:
The required return for QuickChange found by using the CAPM is r E R i R F i E R M R F 4 5 2 0 5 0 1......
Q:
Data for two hypothetical companies in the pharmaceutical industry, DriveMed and MAT Technology, are given in the following table. For both companies, expenditures on fixed capital and working...
A:
MAT Technology is relatively undervalued compared with DriveMed on t......
Q:
Based on the third approach (the H - model), the stock is A. Undervalued. B. Fairly valued. C. Overvalued. Assorted Fund, a UK - based globally diversified equity mutual fund, is considering adding...
A:
C is correct Using the H model where D 0......
The Soldier S Letters Absolutely Heartbreaking And Addictive World War Two Historical Fiction 1st Edition - ISBN: 1803146125 - Free Book