Final answer:
Beta can be calculated through statistical methods like regression analysis, by using values from financial services companies, or with the bottom-up beta method, which compares adjusted averages of peer company betas.
Step-by-step explanation:
There are several ways to calculate beta when determining the cost of equity for a company. Beta is a measure of a stock's volatility in the overall market. One common method for calculating beta is to perform a statistical analysis, such as using regression analysis on historical stock returns against a market index.
Another approach could be to use the beta provided by financial services companies, which have already conducted these analyses and offer beta values for public companies. Additionally, the bottom-up beta method involves adjusting the average of comparable companies' betas based on financial leverage differences.
It's important to realize that beta is only an estimate and varies depending on the specific market index chosen, the period analyzed, and the methodology used.