An example of an external factor that affects a corporation's risk or beta, and hence required rate of return would be ________ by the company.
A) a change in the financing mix used
B) toxic spills
C) a change in the asset mix
D) a change in top management.

Question

Quizplus · Accepted Answer

Toxic spills can lead to lawsuits, fines, and damage to a company's reputation and operations, all of which can significantly increase the company's risk and beta. This, in turn, can increase its required rate of return. Changes in financing mix or top management may have an impact on a company's risk and beta, but these factors may depend on the details of the change and may not always have a clear and direct relationship with risk and return. A change in asset mix may also affect risk and beta, but this may depend on the specifics of the change and how it affects the level and diversification of risk in the company's portfolio of assets.

An Example of an External Factor That Affects a Corporation's