How would issuing debt affect the P/E ratio?
Issuing debt would usually increase the risk to equity investors, so theywill sell off the stock. This will cause price to go down, which is thenumerator in P/E, so P/E will go down as well. Mathematically, an increase in debt raises levered beta, which is a keycomponent of the cost of equity. With a higher […]
What are beta comps and how do you unlever and relever beta?
Beta comps can be used to find beta for a private company or a newcompany with not enough public trading history. The four steps to do this are:
