What will be the beta of equity here?
1. Company tax rate is 30%
2. Xentia is financed with $25 million in market value of debt and $50 million in market value of equity.
3. Xentia has a beta of 1.6.
4. Revolutionary Technology Corporation (RTC) is currently using technology that is similar in risk profile to the new 4D project.
5. RTC is financed with $40 million in market value of debt and $40 million in market value of equity.
6. RTC has a beta of 1.75
7. Xentia borrows debt capital at a cost of 8% p.a. compounded semi-annually
8. The long term market risk premium (including franking credits) is 9.75% p.a.
9. The current yield on Commonwealth Bonds is 4.25% p.a.
10. Xentia operates in an imputation tax system.
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