Which of the Following Statements Is CORRECT

question 120

Multiple Choice

Which of the following statements is CORRECT?

• A) If a company with a high beta merges with a low-beta company,the best estimate of the new merged company's beta is 1.0.
• B) Logically,it is easier to estimate the betas associated with capital budgeting projects than the betas associated with stocks,especially if the projects are closely associated with research and development activities.
• C) The beta of an "average stock," which is also "the market beta," can change over time,sometimes drastically.
• D) If a newly issued stock does not have a past history that can be used for calculating beta,then we should always estimate that its beta will turn out to be 1.0.This is especially true if the company finances with more debt than the average firm.
• E) During a period when a company is undergoing a change such as increasing its use of leverage or taking on riskier projects,the calculated historical beta may be drastically different from the beta that will exist in the future.

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Definitions:

Egoistic Suicides

A concept in sociology referring to suicides committed by individuals who feel disconnected from or not integrated into society.

Anomic Suicides

Suicides resulting from a person's inability to cope with major social changes or a breakdown in social norms, leading to feelings of disconnection.

Societal Pressures

The influence exerted by society on individuals or groups to conform to certain norms, values, or behaviors.

Thanatos

According to the Freudian view, the basic death instinct that functions in opposition to the life instinct.