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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