Which of the Following Correctly Describes How to Determine the Beta

question 6

Multiple Choice

Which of the following correctly describes how to determine the beta for a business unit within a multiple-business corporation?

• A)Use the average of the equity betas for the industry.
• B)Use the beta of the multi-unit enterprise.
• C)Relever the unlevered sector median beta using the capital structure of the unit.
• D)Relever the unlevered sector median beta using the capital structure of the entire multiple-business corporation.

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Definitions:

Inflation

A general increase in prices and fall in the purchasing value of money over a period.

Recession

A period of significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Tax Rates

The percentages of income or value of goods that individuals or companies must pay to the government.

Big Government

A term often used to describe a government or state that has expansive powers and is heavily involved in various economic and social sectors.