Beta of equity in the firm be after the LBO will be more than 1.2 because in leveraged buyout, the stock nearly always assumes a greater beta

Safe Corp has, currently has $ 50 million in debt and $ 100 million in Equity outstanding.

Its stock has a beta of 1.2.

Debt-Equity ratio to 8.

Total Capital as of Now is 150 and currently Debt equity ratioo is 1:2

Now Debt-Equity ratio to 8

So new Debt is 120

New equity 30

The beta of the firm’s stock, ß, denotes how volatile it is relative to the overall market. A measure of 1 is average; greater than 1 represents higher volatility; and less than 1 represents more stability. After a firm goes through a merger or leveraged buyout, the stock nearly always assumes a greater beta. Any large-scale or newsworthy occurrence in a firm’s history regularly sees a concomitant spike in its stock’s volatility due to the uncertainty surrounding it. As a company matures and stabilizes, beta will normally decrease