Capital structure leverage (Session 4 5) (10 marks) (Submission in Excel only) A few publicly listed home appliance manufacturing companies have the following beta, debt, and equity Company Beta Debt Equity Apple 1 4 2,500 3,000 Pear 1 2 5 200 Grape 1 2 540 2,250 Tomato 0 7 8 300 Watermelon 1 5 2,900 4,000 Calculate the beta of the industry keeping in mind the publicly listed sector only, with a debt equity ratio of 25 (Assume a Tax Rate for all companies at 35 ) (Hint One way is to compute the unlevered betas of each of the five firms and then average these unlevered betas and substitute it as the unlevered beta for a private company)

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Question: Capital structure & leverage (Session 4&5) (10 marks) (Submission in Excel only) A few publicly listed home appliance manufacturing companies have the following beta, debt,

Capital structure & leverage (Session 4&5) (10 marks) (Submission in Excel only)

A few publicly listed home appliance manufacturing companies have the following beta, debt, and equity:

Company	Beta	Debt	Equity
Apple	1.4	2,500	3,000
Pear	1.2	5	200
Grape	1.2	540	2,250
Tomato	0.7	8	300
Watermelon	1.5	2,900	4,000

Calculate the beta of the industry keeping in mind the publicly listed sector only, with a debt equity ratio of 25%. (Assume a Tax Rate for all companies at 35%) (Hint- One way is to compute the unlevered betas of each of the five firms and then average these

unlevered betas and substitute it as the unlevered beta for a private company)

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