Caliber's Burgers and Fries is a rapidly expanding chain of fast-food restaurants, and the firm's management wants to es

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Caliber's Burgers and Fries is a rapidly expanding
chain of fast-food restaurants, and the firm's management wants to
estimate the cost of equity for the firm. As a first approximation,
the firm plans to use the beta coefficient for McDonald’s
Corporation (MCD), which equals 0.56, as a proxy for its beta. In
addition, Caliber's financial analyst looked up the current yield
on 10-year U.S. Treasure bonds and found that it was 4.2%. The
final piece of information needed to estimate the cost of equity
using the CAPM is the market risk premium, which is estimated to be
5%. Mcdonald’s Corporation has an enterprise
value of about $80 billion and a debt of $15 billion. If Caliber's
has no debt financing, what is your estimate of the firm's beta
coefficient? You can assume that McDonald’s debt has a beta of
0.20.