The Historic Beta of a Firm Is of Little Use

question 9

Multiple Choice

The historic beta of a firm is of little use as a forecast of the firm's future systematic risk characteristics when

• A)the firm is growing at a rate of 7-10 percent a year
• B)the firm is expanding an existing product line
• C)the firm is expanding into a new product line
• D)all of these answers are correct

---

Definitions:

Net New Equity

The amount of equity capital that is generated by a company through the sale of new shares, after deducting any costs associated with issuing the new equity.

Dividends Paid

The portion of a company's earnings distributed to shareholders, usually on a regular basis.

Operating Expenses

The costs related to the day-to-day operations of a business, excluding cost of goods sold.

Cost of Goods Sold

The total cost of manufacturing or purchasing the goods a company has sold during a period.