Corporate Finance Q83
- A
Using the new debt-to-equity ratio of Budweiser that would result from the additional $45 million debt and $65 million equity is appropriate.
- B
Using the current debt-to-equity ratio of 0.55 is appropriate.
- C
Using the current debt-to-equity ratio of 0.55 is not appropriate, but the debt-to-equity ratio of the new product line i.e. 0.69 is appropriate.
- Option : C
- Explanation : When making adjustments from the asset beta, derived from the comparables, to calculate the equity beta of the new product, the correct approach is to use the debt-to-equity ratio of the new product line.
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