The family-owned (non-publicly traded) company Hestia has, over the years, developed a substantial business related to the development and leasing of commercial real estate. The company is interested in professionalizing the business economics aspect of its operations, and you have been hired as a consultant in this context to provide assessments regarding the use of relevant return requirements for the business.

Initially, you are gathering data for the two publicly traded companies within the same sector. The idea is to use market data from publicly traded companies as a starting point for your assessment of requirements. Company Gamma has an estimated equity beta of 2.0 and a debt-to-equity ratio of 2.0. Company Omega has an estimated equity beta of 1.6 and a debt-to-equity ratio of 1.8. The debt beta is 0.20 for both of these real estate companies.

What is the average beta for the total capital for publicly traded companies in the sector? Explain.

Answer rating: 100% (QA)

The average beta for total capital also commonly known as the asset beta or unlevered beta refers to ... View the full answer