Which of the Following Methods Involves Calculating an Average Beta

question 167

Multiple Choice

Which of the following methods involves calculating an average beta for firms in a similar business and then applying that beta to determine the beta of its own project?

• A) Risk premium method.
• B) Pure play method.
• C) Accounting beta method.
• D) CAPM method.
• E) Answers b and c are both correct.

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Definitions:

Straight-Line Method

A depreciation method that allocates an equal amount of an asset's cost to each year of its useful life.

Resale Value

The estimated market value of an asset if sold again; often used in reference to vehicles, electronics, and real estate.

Office Furniture

Equipment and accessories designed for use in a workplace setting, including desks, chairs, and filing cabinets.

Sum-Of-The-Years-Digits

A method of depreciation which accelerates cost recovery of an asset by applying a decreasing fraction of its depreciable cost each year.