You are going to value Lauryns Doll Co using the FCF model A

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn\'s has a reported equity beta of 1.5, a debt-to-equity ratio of 0.7, and a tax rate of 20 percent. Based on this information, what is the asset beta for Lauryn’s? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Solution

Asset Beta = Equity Beta / [1 + (1 - Tax Rate)(Debt/Equity)]

= 1.5 / [1 + (1 - 0.20)(0.70)]

= 1.5 / 1.56 = 0.96