Mathematics · Financial Management
Jacob Co is considering an investment in the biotechnology sector. It identified a proxy firm, Bio-Proxy Co, which has an equity beta of 1.45 and a debt-to-equity ratio of 2:3 based on market values. Jacob Co is financed 70% by equity and 30% by debt. Given a risk-free rate of 4%, an equity risk premium of 6%, and a corporation tax rate of 25%, what is the asset beta of the biotechnology sector?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 11.45
- 21.16
- 30.97✓
- 40.87
Correct answer
0.97
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