Estimate of golden chemical level equity beta

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Reference no: EM132065599

You need t estimate the equity beta for Golden Chemical inc, Golden's debt-to-asset ratio is 20% and it debt is 0.25. the following table shows the debt betas and the debt-to-equity ratios for three comparable chemical firms. assume the tax rate is 40% for all four firms

company beta d/e ratio debt beta

Eastman chemical 1.45 0.75 0.3

Celanese corp 1.28 0.82 0.3

Down chemical 2.56 0.96 0.3

A. Assuming debt is risk -free, use the infromation given above to estimate the unlevered equity of each of these companies

B. Assuming debt is risk free, what is your estimate of Golden Chemical level equity beta?

C. The current risk free rate is 2.4% and the current market risk premium is 7.53%. If Golden before tax cost of de and it is 6.8% and 6.8% and has no preferred stock in its capital structure, what is Golden weighted average cost of capital?

Reference no: EM132065599

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