Looks equal to me.作者: huangxiaoxie 时间: 2011-7-13 13:45
why do you say E/100- unless you plan to replace E in percentage with respect to Total Market cap it will not hold作者: ryanlb 时间: 2011-7-13 13:45
D=1-E, do the math.作者: Pegasus2008 时间: 2011-7-13 13:45
I just tried this formula with D to E of 2 to 3 and it works... Both equal O.6 times levered beta
Only problem with this is that why bother changing the formula? In order to find out your total E you need to consider it in relation to assets and debt so it doesn't help you作者: mp3bu 时间: 2011-7-13 13:45
yeah I can remember it like this too. cool!
just to do an example, dreary i hope you are putting E as %.
so if
D = 20%
E = 80%
Beta = 1.2
UB = 80/100 * 1.2 ==> 4/5*1.2 = .96
If the other company we are trying to lever has D= 30%, E = 70%, then you get
leveredB = .96 / .7 = 1.37 which makes sense, cuz more Debt means higher beta? is that true?作者: bingbingliang 时间: 2011-7-13 13:45
Yep the one with the higher D/E is the one with the higher beta.作者: ninja1024 时间: 2011-7-13 13:45
just to be sure....the one with the higher D/E, not the higher debt.作者: ap0258 时间: 2011-7-13 13:45
righto! its all about D/E ratio.作者: scarecrow 时间: 2011-7-13 13:45
This is why I was originally confused to why the change in formula...makes sense though if you can't remember the real one
I just wouldn't want to get confused when they throw the capital structure in various ways... D/E, or D/A et cetera.... be careful with these ratios more importantly in calculating WACC
A very common mistake people do is they use the D/E ratio in the weighting for Debt in calculating WACC rather than changing it to D/A (i.e., D/D+E)
I had a corporate finance class in my masters program and this kind of stuff is my favorite...corporate finance section is the bomb作者: xilige 时间: 2011-7-13 13:45
Now that's not working hard.. that's working smart... thanks man
