Estimate the unlevered and levered beta for hp

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You are analysing the beta for HP and have broken down the business of the company into four divisions. The company has $1 billion in debt, and it is allocated to the divisions in the same proportion as their market values. The tax rate is 36%. The market values and unlevered betas for the four divisions are:

Division              Market value of equity      Beta

Mainframes                  $2 billion                  1.1

PCs                             $2 billion                   1.5

Software                          $1 billion                2.0

Printers                            $3 billion                 1.0

Question a. Estimate the unlevered and levered beta for HP.

Question b. What is the assumption you have made about the debt beta and hence riskiness of the debt

Reference no: EM132493157

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