Could someone please explain why, in the second part, pension assets are originally ignored when calculating the total asset beta (0.47)?

Equity beta= 1 Risk free rate= 5% Market Risk Premium= 8% Debt: $9MM Equity: $21MM Pension assets beta= 0.6 Pension assets: $15MM Part 1 Operating assets beta before including the pension liabilities into the balance sheet: ___ Part 2 Operating assets beta after incorporating the pension assets into the balance sheet: ___ Also, what is the difference between the two parts referring to the inclusion of the pension liabilities vs. the pension assets?

The language is bit confusing. However, the question is essentially operating asset beta before and after , inclusion of pension assets AND LIABILITIES BEFORE: Operating Assets = 30 m Liab & Equity : Debt 9+ Equity 21 = 30 Equity beta =1, debt beta = 0; therefore to match, operating asset beta = 0.7 i.e. ( 21*1+9*0)/30 AFTER: Operating Assets = 30 m PENSION ASSETS = 15 Liab & Equity : Debt 9+ Equity 21+ PENSION LIABILITY 15 = 45 Equity beta =1, debt beta = 0; Pension asset beta = 0.6, therefore to match, Total asset beta = 0.47 i.e. ( 21*1+9*0+15*0)/45 Now, pension asset beta is 0.6, so operating asset beta = 0.40 i.e. (0.47 *45 -0.6*15 ) / 30