Questions:
1. What types of firms need to estimate industry asset betas? How would such a firm make the estimate? Describe the process step by step.
2. Binomial Tree Farm's financing includes $5 million of bank loans. Its common equity is shown in Binomial's Annual Report at $6.67 million. It has 500,000 shares of common stock outstanding, which trade on the Wichita Stock Exchange at $18 per share. What debt ratio should Binomial use to calculate its WACC or asset beta? Explain