Question

Defense Inc has an EV of $200 million, debt of $50 million and a cash balance...

Defense Inc has an EV of $200 million, debt of $50 million and a cash balance of $20 million. It currently has a levered beta of 1.50. It is considering using the cash to buy back its shares. Estimate the levered beta after the share buyback transaction. (The marginal tax rate is 20%).
Select one:
A. 1.82
B. 1.54
C. 1.51
D. 1.12

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Answer #1

Correct answer: B. 154

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Hope it will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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