The systematic business risk of a project can be proxied by the beta of a similar asset that is financed with one hundred percent equity.

Question

Quizplus · Accepted Answer

This is true since beta measures the systematic risk of an asset, and financing an asset with equity alone eliminates the influence of debt financing on the asset's risk. Therefore, the beta of a similar asset that is financed with one hundred percent equity can be used to proxy the systematic business risk of a project.

The Systematic Business Risk of a Project Can Be Proxied