Betas

This is kind of embaressing to ask…but if there are 3 diff. projects .and two project’s beta;s are given…and the firm’s betas given…then to calculate the 3rd project beta…we set it up as firm beta = average of the 3 project betas right??? Is there any other way also? Thanks

Asssuming that there are just three projects in the firm and you need to do a weighted average…

Thanks…

Just remember that if the firm has long term debt on its balance sheet, you’re going to have to remove the effect of leverage to get the asset beta of the firm, not the equity beta.

you unlever then relever. betas cannot be applied haphazardly. it is in the level 1 books.