 The process of unlevering and levering competitions used to estimate asset risk and equity risk of a company are equally applicable to estimate these risk measures for any project of another company. So, how we can estimate asset beta or equity beta for a given project. The process follows the same steps like at first we need to estimate a comparable company's equity beta or in other terms the levered beta or we can call it as a BL. Then using the capital structure and tax rates of the comparable company we need to estimate the asset beta for that comparable company. At third when we have the unlevered asset beta then we need to use the capital structure marginal tax rates of the particular project in order to calculate its own equity risk or the equity beta which will be known as the project beta. We have an example for understanding this computation of project beta. The example says that a company is planning a project to be financed with that equity ratio of 40% the marginal tax rate for this company and a comparable company is 35% the beta and that equity ratio of the comparable company are 1.2 and 0.125 respectively. The unlevered beta of the comparable company is we are using the model of determining the asset beta of comparable company and the resulting value is 1.1098. Then using this asset beta along with the tax structure and capital structure of the project we can determine the levered beta for the project or the project beta which is 1.3983 or we can say it is 1.40. Now this 1.3983 the beta of project will be used in our CAPM model in order to estimate the project's cost of capital and then we will be using this project's cost of capital in combination with the project's cost of debt in a weighted average form in order to determine the project's overall cost of capital or the project's weight. We have another example where we can learn the beta computation under pure play method. Here the example says for arrow technique SA which is an unlisted company we need to find its levered beta using the given information. The information says that the average levered and average unlevered betas for the comparable companies operating in different European countries are 1.6 and 1.0 respectively. Arrow techniques debt to equity ratio based on the market value is 1.40. Now based on the market value means that in order to determine capital structure of this particular firm the arrow techniques we are not using its book value of the capital rather we are using market values of its capital structure. The company's corporate tax rate is 35%. Now putting these values into the equity risk model we have the equity beta of 1.924 or we can call it as the project beta. We have another example where we can learn to determine the project beta and the usage of this beta in order to determine the VAC for the project. The example says for barren chemicals which is a privately owned German unlisted company we need to find its VAC using the given information. The information is that the nominal risk-free rate is represented by the yield on the long-term 10-year German bond which at valuation date is 4.5%. Assume 5.7% as an average long-term historical ERP in Germany. ERP means the equity risk premium. Barren chemical corporate tax rate is 38%. Barren chemicals target debt equity ratio is 0.70. The company is operating at its target debt to equity ratio. Barren's return on debt or the cost of debt has an estimated spread of 225 basis points or 2.25% over the 10-years bond. Polling is additional information on comparables for barren chemicals. So these are the three comparable companies from three different countries. The companies have different tax rates. The companies have different market capitalization. The companies have different amount of debt. So these three companies have different debt equity ratios and accordingly we have different values of betas for these companies individually. When we average the debt equity ratio of three companies, we have an average debt equity ratio of 1.13 and similarly doing the average of three values of betas for these three companies, we have an average beta of 1.08. So we have an average debt equity ratio of 1.13 and average beta of 1.08 for our comparable companies as an average value. Now how to solve this problem? To compute return on equity, we have comparable company betas that need to be unlevered. And then we need to compute an average for the company with business risk similar to the average of these three companies. We have three betas of the companies earlier now. When we have unlevered these betas, we have certain values for individual company. The average unlevered beta using these three individual betas comes to 0.60. In the next step, now we need to leverage the average unlevered beta for peer group averages. And using the parent company's target debt equity ratio and the marginal tax rate. So we have all these values and using the beta equity model or the levered model for determining the company's equity beta. The equity beta comes to 0.86 or we can say it is the parent company's beta. Now we have computed the value of beta so we can use this value of 0.86 as beta into the CAPM model along with the value of risk-free rate and the market return. We can determine the value of return on equity or the cost of equity for this company, which is 9.4%. Till now we have determined the cost of equity for the company. Now we need to determine the weights of the capital structures component. We have debt capital, we have an equity capital. So when we compute the debt weight, it comes to 0.41 and deducting this 0.41 from the one as a whole capital, the weight of equity comes to 5.9. Now we have also determined the weighted capital. So we need to determine now the cost of debt after tax, which is 4.19%. Till now we have determined the weights of debt and equity capital. We have determined the cost of debt. We have determined the cost of equity. Now we need to determine the parent company's overall cost of capital, which is known as WEK, putting the values of cost of debt after tax, weight of debt, cost of equity and the weight of equity. We come to a value of 7.72, which is the overall cost of capital for the parent's company or we can call it as the company's WEK.