Solution-Calculate the unlevered asset betas

Calculate the unlevered asset betas

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Reference no: EM133112090

As connoisseurs of elegant fast food cuisine, we are interested in making a bid for the Greens-to-Go restaurant division of SlurpCo, Inc. SlurpCo has three primary divisions, soft drinks, Major League football franchises, and the G to G restaurants. Given the unique risk profiles for each of these divisions, it is imperative we estimate G to G's divisional beta to determine its fit into our company. Consider the following information:

*Company Name*	Debt Ratio	Levered Equity Beta	Marginal Tax Rate	Revenues ($ Mill)
Parent Company	60%	0.95	40%
Greens to Go	65%	??	40%

Burger Doodle	35%	0.75	35%	1.95
Southern Fried Taco	45%	1.25	30%	2.85
Buffet Pizza Company	40%	1.05	27%	0.75

Calculate the unlevered asset betas for each of the three comparable firms being sure to adjust appropriately for their respective marginal tax rates
Calculate the arithmetic industry average of the three asset betas
Calculate the weighted average asset beta using the revenues to determine the weights
Estimate a levered equity beta for the Greens-to-Go division using the both the arithmetic and the weighted averages.

Reference no: EM133112090

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Calculate the unlevered asset betas

Reference no: EM133112090

Reference no: EM133112090

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