The Pure Play Method

question 57

Multiple Choice

The pure play method

• A) calculates beta using only project returns.
• B) uses the beta of a firm that is similar to the project being analyzed to determine the required rate of return for the project.
• C) selects a firm similar to the project being analyzed and uses its returns as the market return in estimating a project beta.
• D) selects one of the firm's existing projects that is similar to the project being analyzed and uses that project's required rate of return.

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Definitions:

Rate of Return

The increase or decrease in the value of an investment during a set period, represented as a proportion of the investment's original price.

Income Distributions

Payments made to investors from the earnings derived from the investments within a fund, such as dividends or interest payments.

Rate of Return

The earnings or losses experienced with an investment over a specific duration, depicted as a percentage of the investment's original expense.