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Explain the concept of beta and provide its formal definition. How is beta estimated empirically? How is beta used in project valuation? Explain. (8 marks)
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Explain the concept of beta and provide its formal definition. How is beta estimated empirically? How is beta used in project valuation? Explain. (8 marks)
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b) ii. Suppose company A plans to acquire company B, and suppose that the beta of B is different from the beta of A. How are the company betas used in valuing the acquisition? How would potential operational synergies affect the usefulness of beta in valuing the acquisition? Explain. (6 marks)
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