Suppose Zenos Manufacturing is contemplating investing in a new business. An existing company in the target industry has an equity beta of 0.90 but is very conservatively financed with a market value, equity-to-value ratio 95%. Zenos intends to use an equity-to-value ratio of 30%. 

What beta should Zeno use in estimating a cost of capital in the new business?

Answer rating: 100% (QA)

To estimate the cost of capital for a new business Zenos Manufacturing should use a leveraged beta t... View the full answer