Question
beta should take all the possible factors that might affect a particular business or project to prevent major losses. By taking a few shots or
beta should take all the possible factors that might affect a particular business or project to prevent major losses. By taking a few shots or visit the financial market to observe the factors may not be sufficient to actually judge the risk of the market, be it systematic or unsystematic. As Adair discusses: One thing that all of the professional beta providers agree on is two to five annual observations is not an acceptable sample size. They use monthly or even weekly returns which increases sample sizes while keeping the observations relatively recent.
Moreover, beta is not only used in the measures of the overall expected return on a project (CAPM) but also the weighted average cost of capital (WACC). As the WACC calculates the average of debt and equity needed to finance a project (Ross 2010), beta is as valuable as well.
Would you agree with the foregoing discussion that beta is one of the challenging variables in the corporate finance world and needs to be carefully observed to use this dynamic concept and gain from it?
What are your views on this?
**** It is thequalityof the explanation of that matters, not the number of words . please reference for further reading,
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