You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.4, a debt-to-equity ratio of 0.7, and a tax rate of 30 percent. Based on this information, what is the asset beta for Lauryn’s? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Equity Beta = 1.40
Debt-Equity Ratio = 0.70
Tax Rate = 0.30
Asset Beta = Equity Beta / [1 + (1 - Tax Rate) * Debt-Equity
Ratio]
Asset Beta = 1.40 / [1 + (1 - 0.30) * 0.70]
Asset Beta = 1.40 / 1.49
Asset Beta = 0.94
So, the asset beta for Lauryn’s Doll Co. is 0.94
You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources,...
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