Which of the Following Methods Involves Calculating an Average Beta

question 3

Multiple Choice

Which of the following methods involves calculating an average beta for comparable firms and using that beta to determine a project's beta?

• A)Risk premium method
• B)Pure play method
• C)Accounting beta method
• D)CAPM method
• E)Discounted cash flow model

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Definitions:

Interval Scale

A scale of measurement in which there are equal distances between measurements but no absolute zero reference point.

Equal Distances

In mathematics and statistics, a concept where the separation between points or values in a sequence or scale is consistent across the sequence.

Absolute Zero

The point on a scale at which no quantity of what is being measured exists, representing a complete absence of that entity.

ACT

A standardized test used for college admissions in the United States, measuring skills in English, mathematics, reading, and science, with an optional writing test.