Use TheUse the Firm Has Only Been Listed on the Stock

question 24

Multiple Choice

Use theUse the firm has only been listed on the stock exchange for a short time,you do not have an accurate assessment of Nielson's equity beta.However,you do have the following data for another firm in the same industry: Nielson has a much lower debt-equity ratio of .5,which is expected to remain stable,and Nielson's debt is risk free.Nielson's corporate tax rate is 21%,the risk-free rate is 5%,and the expected return on the market portfolio is 10%.
-Nielson's estimated equity beta is closest to:

• A)0.95.
• B)1.00.
• C)1.25.
• D)1.45.

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Definitions:

Random Assignment

A technique for assigning individuals to different groups in an experiment using randomization, to ensure that every participant has an equal chance of being placed in any group.

Cause-effect Inferences

Logical deductions that suggest a relationship where one event (the cause) leads to the occurrence of another event (the effect).

External Validity

The extent to which research findings can be generalized to settings or groups outside the study.

Confounding Variables

External factors that can influence both the dependent and independent variables, potentially biasing the results of a study.