is a measure of the business risk of thefirm.
A firm has a portfolio of assets, and therefore, the asset betaof a firm,
is the weighted average of betas of individualassets.
Average asset beta = beta of asset 1
weight of asset 1 + betaof asset 2
weight of asset 2 +«+ beta of asset
weight of asset
A firm¶s assets are generall
debt and equit
herefore, a firm¶s asset beta is also equal to the weightedaverage of the firm¶s equit
beta and debt beta. Assuming nocorporate tax, the beta of assets will be as follows:
a e d
E DV V
F F F!