The Equity Beta of a Levered Firm Is 1

question 7

Multiple Choice

The equity beta of a levered firm is 1.2. The beta of debt is 0.2. The firm's market value debt to equity ratio is 0.5. What is the asset beta if the tax rate is zero?

• A) 1.2
• B) 0.73
• C) 0.2
• D) None of the above