Beta for a project?

[dejavu]

Thanks, I now understand that Beta (asset) is a constant and remains unaffected by Beta (equity).

And regarding my second doubt, I think the author wants us to make the comparison between B’s equity beta and A’s levered Beta (which we will obtain after unlevering B’s equity beta and re-levering to suit A). I do not think his intention was to ask us to compare A’s asset beta to A’s equity beta (if so, then the latter would be more than the former, even if A had a debt-equity leverage between 0 and 1). Correct me if I’m wrong?

[S2000magician]

@dejavu

Thanks, I now understand that Beta (asset) is a constant and remains unaffected by Beta (equity).

Good to hear.

@dejavu

And regarding my second doubt, I think the author wants us to make the comparison between B’s equity beta and A’s levered Beta (which we will obtain after unlevering B’s equity beta and re-levering to suit A). I do not think his intention was to ask us to compare A’s asset beta to A’s equity beta (if so, then the latter would be more than the former, even if A had a debt-equity leverage between 0 and 1). Correct me if I’m wrong?

If that’s what the author wanted, it’s not remotely what he asked.

All in all, it’s a lousy question.

[Harrogath]

Remember that levered beta is the equity beta and the unlevered beta is the asset beta.