ap0258

Well, it defenitely makes sense.
But frankly saying, I'm still confused a little bit about all this.

Please consider the situation that I've already referred to:

the project is slightly less risky than the company business (project risk <> company risk), for example the company asset beta is 1 and the project asset beta is 0.9;

the 1-mln project is fully financed with a new debt issuance (D = 1 mln, E = 0 mln);

Then if we try to calculate levered beta for the project using project capital structure we get:
proj.equity.beta = proj.asset.beta * ( 1 + (1 - T) * D/E ) = 0.9 * (1 + (1 - T) * 1/0 ) = Inf

Notice that it's all right if we calculate the project equity beta using the whole company weights.

Please clarify. I trust this hint can help me fully grasp the concept.