You would like to know the beta of debt for cooper Industries. The value of coopers outstanding equity is $40 million, and you have estimated its beta to be 1.2. However, you cannot find enough market data to estimate the beta of its debt, so you decide to use the Black-Scholes formula to find an approximate value for the debt beta. cooper has four-year zero-coupon debt outstanding with a face value of $100 million that currently trades for $75 million. Cooper pays no dividends and reinvests all of its earnings. The four-year risk-free rate of interest is currently 5.13%. What is the beta of cooper’s debt?
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