Use TheUse the Firm Has Only Been Listed on the Stock

question 24

Multiple Choice

Use theUse the firm has only been listed on the stock exchange for a short time,you do not have an accurate assessment of Nielson's equity beta.However,you do have the following data for another firm in the same industry: Nielson has a much lower debt-equity ratio of .5,which is expected to remain stable,and Nielson's debt is risk free.Nielson's corporate tax rate is 21%,the risk-free rate is 5%,and the expected return on the market portfolio is 10%.
-Nielson's estimated equity beta is closest to:

• A)0.95.
• B)1.00.
• C)1.25.
• D)1.45.

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Definitions:

Water Strider

An insect that can walk on the surface of water due to the high surface tension of water and the long, water-repellent legs of the insect.

Hydrogen Ion

A positively charged ion (H+) that forms when a hydrogen atom loses its electron and effectively becomes a proton.

Hydroxide Ion

A negatively charged ion made of oxygen and hydrogen (OH-), which is a common component of bases.

pH

A measure of the acidity or basicity of an aqueous solution, indicating the concentration of hydrogen ions.