Enterprises Has a Levered Beta of 1

question 3

Multiple Choice

Enterprises has a levered beta of 1.10, its capital structure consists of 40% debt and 60% equity, and its tax rate is 40%.What would Ang's beta be if it used no debt, i.e., what is its unlevered beta?

• A)0.64
• B)0.67
• C)0.71
• D)0.75
• E)0.79

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Definitions:

Investment Center

A segment or area of a business responsible for generating revenue as well as controlling its own costs and investments.

Balanced Scorecard

A performance evaluation approach that incorporates multiple performance dimensions by combining financial and nonfinancial measures.

Nonfinancial Measures

Performance indicators not based on financial data, often used to assess aspects like customer satisfaction, employee turnover, or production quality.

Financial Measures

Various metrics used to assess a company’s financial health, performance, and stability, including profitability, liquidity, and solvency ratios.