Which of the following makes this a true statement? Ideally, when searching for

Question

Which of the following makes this a true statement? Ideally, when searching for a beta for a new line of business one could find other firms engaged in the proposed new line of business and use their betas as proxies to estimate the project's risk. one would like to find at least three or four pure-play proxies. two, or even one, proxies might represent a suitable sample if their line of business resembles the proposed new project closely enough. All the answer make this a true statement. use the MIRR decision rule to evaluate this project; should it be accepted or rejected? 12.00%. reject 31.21%. accept 34.22%, accept 80.67%. accept A capital budgeting technique that converts a project's cash flow using a more consistent reinvestment rate prior to applying the internal Rate of Return, IRR, decision rule. discounted payback net present value modified internal rate of return probability index TellAll has 10 million shares of common stock outstanding. 20 million shares of preferred stock outstanding, and 100 thousand bonds. If the common shares are selling for $32 per share, the preferred shares are selling for $20 per share, and the bonds are selling for 106 percent of par, what would be the weight used for preferred stock in the computation of TellAll's WAC? 33.33% 48.43% 55.55% 66.45% Shares of stock issued to employees that have limitations on when they can be sold executive stock options privately held information restricted stock stock market bubble

Explanation / Answer

Solution 22:

Option 4 is correct.

To estimate the beta of a project, generally firms use proxy method. In proxy method, they find firms who have similar kind of projects and take their beta. Thus, beta of three four proxy is collected and averaged. This averaged beta is used as the project beta. If they find firms, which exactly resembles in business activities, only one or two proxies are sufficient for the estimation of beta. Therefore, all the given options are correct.

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