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abdallaex abdallaex
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8 months ago
Which of the following statements is correct?


▸

If a company with a high-beta stock merges with a low-beta company, the best estimate of the new merged company’s beta is zero.



▸

The beta of the “average stock” or “market” always changes slightly over time, but the average beta is always equal to 1.



▸

During a period when a company is undergoing a change such as increasing its use of leverage or taking on riskier projects, the calculated historical beta may not be close to the “true” or “expected future” beta.



▸

If a newly issued stock does not have a past history that can be used as a basis for calculating beta, then we should always estimate that its beta will turn out to be zero. This is especially true if the company finances with more debt than the average firm.

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
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tkane127tkane127
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8 months ago
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