Question: You are evaluating the beta for ITC. ITC has three businesses - Hotels, Tobacco and FMCG. The equity beta of Hotels sector is 1.9 and

You are evaluating the beta for ITC. ITC has three businesses - Hotels, Tobacco and FMCG. The equity beta of Hotels sector is 1.9 and the average debt equity ratio for the sector is 50%. The equity beta of Tobacco sector is 0.8 and the average debt-equity ratio for tobacco sector is 20%. The equity beta of FMCG sector is 1 and the average debt-equity ratio for the sector is 30%. ITC gets 70% of its operating profits from tobacco, 20% from FMCG and 10% from Hotels. If tax rate is 30% and ITC's debt-equity ratio is 25%, estimate ITC's beta. Ignore cash effects. a. 1.20 b. 1.02 c. 1.11 d. 0.94

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