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Which of the following assumption is a base for the process of unlevering and relevering betas to an assumed capital structure?
Suggested Answer: A
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24 comments · newest first
MA
Malcom
10 months ago
C is key, gotta consider market value for accurate beta calculations.
CR
Cristal
10 months ago
Wait, can companies really just change their capital structure that easily?
RO
Rosendo
10 months ago
Totally agree with A! It's all about flexibility in financing.
BE
Bettina
11 months ago
B makes sense too, investors always want to minimize risk.
DA
Daniela
11 months ago
I think it's definitely A. Companies can adjust their capital structure.
BL
Blair
11 months ago
The option about debt and equity at market value sounds familiar, but I wonder if it really captures the essence of the assumptions we discussed in class.
EV
Evette
11 months ago
I feel like the ability to change capital structure is important, but I can't recall if it's the foundational assumption for unlevering and relevering betas.
TH
Theron
12 months ago
I remember practicing a question similar to this, and I think the correct answer might be related to how companies are valued at market value during the process.
YU
Yuonne
12 months ago
I think the assumption about investors being risk averse might be relevant, but I'm not entirely sure if it's the main one for unlevering and relevering betas.
DE
Devora
1 year ago
Confident on this one. The right answer is that the subject company has the ability to change its capital structure. That's a core assumption.
IN
Ines
1 year ago
I've got it! The correct assumption is that the amount of debt and equity is at market value. That's the foundation for adjusting the beta.
VA
Val
1 year ago
Wait, I'm a bit confused. Isn't it also important that investors are risk-averse? Or is that not directly related to the unlevering/relevering process?
CA
Cary
1 year ago
Okay, I think I know this one. The key assumption is that the subject company's capital structure is at market value, right?
CO
Cordelia
1 year ago
Hmm, this seems like a tricky one. I'll need to think through the assumptions behind unlevering and relevering betas carefully.
JU
Justa
1 year ago
That's a good point, Lennie. It's important to consider investor behavior in these calculations.
LE
Lennie
1 year ago
But what about the assumption that investors are risk averse? Doesn't that play a role too?
RO
Rory
1 year ago
I agree with Justa, it makes sense to base the process on market values.
JO
Jolanda
1 year ago
Haha, I bet the exam writer had a field day coming up with these options. But D is definitely the way to go.
JU
Justa
1 year ago
I think the assumption is that the amount of debt and equity are at market value.
AL
Aleshia
1 year ago
D seems like the most logical choice here. The capital structure of the subject company is crucial in this process.
FA
Fatima
1 year ago
I think the correct answer is D. The amount of debt and equity at market value is the key assumption for unlevering and relevering betas.
VO
Vonda
1 year ago
Investors being risk averse also plays a role in this process.
FI
Fidelia
1 year ago
I think it's important to consider that subject companies are at market value as well.
AL
Alonso
1 year ago
I agree, the amount of debt and equity at market value is crucial for this process.