Which of the following methods involves calculating an average of the beta coefficients of numerous firms that are in the same (or a quite similar) line of business and then using that average beta coefficient to determine the appropriate required rate of return for a new capital budgeting project?
A)Sensitivity analysis method
B)Pure play method
C)Accounting beta method
D)Risk-adjusted method
E)Net present value (NPV) method

Question

Quizplus · Accepted Answer

The pure play method involves calculating an average of the beta coefficients of numerous firms that are in the same (or a quite similar) line of business and then using that average beta coefficient to determine the appropriate required rate of return for a new capital budgeting project.

Which of the Following Methods Involves Calculating an Average of the Beta