Homework Answers
We need to find levered beta for Koonong Conglomerate. We will use the following formula for calculating this value:
![Debt Beta levered = Beta unlevered * 1 - (1 - tax)* AX Equity]](http://img.homeworklib.com/questions/05a9a400-77fe-11ea-8007-91dcf44cd79a.png?x-oss-process=image/resize,w_560)
....….….….….….….….…..(1)
The Koonong Conglomerate operates in two segments and we have been given the unlevered beta of these segments along with the estimated market value of each segment. So, in order to find the unlevered beta of the conglomerate, we will take weighted average of these unlevered beta values.
We have been given tax rate of 28% and Debt-to-Equity ratio equal to 0.42. Putting in all these value in the equation (1), we get:
![Beta levered = 1.412 * [1 - (1 -28%) *0.42] = 0.9855](http://img.homeworklib.com/questions/06b35c70-77fe-11ea-bf3f-e78b1eca1ff2.png?x-oss-process=image/resize,w_560)
Therefore, levered beta of the Koonong Conglomerate is 0.9855.
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