Question

In: Finance

Which of the following statement regarding beta is NOT correct? Firms with higher fixed cost than...

  1. Which of the following statement regarding beta is NOT correct?
    1. Firms with higher fixed cost than its peers would generally have higher equity beta.
    2. Firms with higher debt than its peers would generally have higher equity beta.
    3. Debt beta is usually low and almost equal to zero.
    4. Asset beta is always lower than equity beta.

Solutions

Expert Solution

Option D. Asset beta is always lower than equity beta. This is not correct as in case of unlevered company, asset beta is equal to equity beta and hence asset beta is not always lower than equity beta


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