Question
Suppose that Apex HealthServices has four difference projects.These projects are listed below, along with the amount of capital invested and estimated corporate and market betas:
Suppose that Apex HealthServices has four difference projects.These projects are listed below, along with the amount of capital invested and estimated corporate and market betas:
Project | Amount Invested | Corporate Beta | Market Beta |
Walk-in clinic | $500,000 | 1.5 | 1.1 |
MRI facility | $2,000,000 | 1.2 | 1.5 |
Clinical Laboratory | $1,500,000 | 0.9 | 0.8 |
X-ray Laboratory | $1,000,000 | 0.5 | 1.0 |
(a)why do the corporate and market betas differ for the same project? (b)what is the overall corporate beta of Apex HealthServices? Is the calculated beta consistent with corporate risk theroy? (c)what is the overall market beta of Apex Health services? (d) How does the riskiness of Apex's stock compare with the riskiness of an average stock? (e) would stock investors required rate of return on Apex that is greater than, less than,or the same as the return on an average-risk stock?
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