Hey everyone On page 68 (example 13) of the CFAI corp finance book, book 4 does anyone know how, when they complete the table for you, do they get exact values of D/D+E? For example, in the table they have in the first column that D/D+E=.1, can anyone explain how they got this? Also, how can they get specific Betas in that table? They give us the unlevered Beta of .9, but then how would you go about re-levering this without a value for D/E? I figured you would use Bproject= Bequity etc etc but you need the D/E ratio here to come up with Bproject. Thanks and I hope everything is going well with your studies.
they chosen the tresholds arbitrally to check what is WACC for different levels. you can obtain the D/E if you know what is the D/D+E, f.e. if D/D+E=0.2 then E/D+E=0.8=1-(D/D+E) now you can get D/E by dividing one by another: D/E=0.2/0.8=0.25