Question
Suppose the domestic CAPM beta of IBM (US-based MNC) is 1.12 and its world beta is 0.87. Excess market returns on the S&P 500 are
Suppose the domestic CAPM beta of IBM (US-based MNC) is 1.12 and its world beta is 0.87. Excess market returns on the S&P 500 are 5.30% on average, while the world market equity premium is 6.20%. Which of the following statements is true?
- IBMs cost of equity capital would be 0.54 higher under world CAPM compared to domestic CAPM.
- IBM stock prices are more correlated with US equities compared to UK equities.
- IBMs cost of capital would be lower if its investors held a globally diversified portfolio.
- Both B and C.
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Financial Management for Public Health and Not for Profit Organizations
Authors: Steven A. Finkler, Thad Calabrese
4th edition
133060411, 132805669, 9780133060416, 978-0132805667
