Question: Which one of the following is not a determinant of beta of the equity of a company? cyclicality of revenues operating leverage financial leverage

Which one of the following is not a determinant of beta of the equity of a company?

 

cyclicality of revenues

operating leverage

financial leverage

All of the above are determinants of beta.

 

QUESTION 23

When the SML is written in the following form, the last tem in the equation represents ______________:

RS,L = RF + ?S,U (RM - RF) + ?S,U (B/S) (RM - RF)

total risk premium

business risk premium

financial risk premium

non-systematic risk premium

 

QUESTION 24

When we consider the corporate taxes, the value of a levered firm can be shown as the next equation: V L = V U + tc B.

The last tem (=tc B) in the equation above represents _______.

present value of taxes

present value of tax shields

present value of financial risk premium

present value of bankruptcy costs





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