Corporate Finance: Newsletter – October 5,
2007
Where
we are in classÉ
Where
you should be in the projectÉ
Data NotesÉ
Next week, we will introduce the notion of bottom-up betas where we will estimate betas for a firm by looking at comparable firms. To get a quick estimate of the bottom-up beta for your firm, you can visit the Yahoo site:
Once you type the symbol for your firm, and get the information on your firm, click on ratio comparisons. You will get a beta for the 50 companies that Yahoo classifies as comparable to your firm. You will also get a book debt to equity ratio for these companies. To estimate the bottom up beta, first convert the book debt to equity ratio by dividing by the price to book ratio average for the sector:
Market debt to equity = Book debt to equity/Price to book ratio
Then unlever the average beta using this market debt to equity ratio (you can use a 35% tax rate)
You can also get the bottom-up betas that I estimated by sector from my web site:
http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html
Miscellaneous FAQs
What will this quiz cover?
It will cover the first four chapters of the book and everything in the lecture notes through WednesdayÕs class.
How can I best prepare for the
quiz?
Work through as many problems as you can. The less of a quantitative background you have, the more important it becomes that you do this.