Suppose you are interested in valuing an investment project for Exxon-Mobil

Finance May 21, 2021

Suppose you are interested in valuing an investment project for Exxon-Mobil. The company has market leverage of 30%. The equity beta of Exxon-Mobil is 0.75. Which of the following cannot be the correct measure of the business risk (or asset beta) of Exxon-Mobil?

Group of answer choices

a. 0.6

b. 0.8

c. 0.65

d. Any of these choices could be the correct business risk for Exxon-Mobil.

Expert Solution

Equity beta will always be greater than or equal to asset beta i.e, Equity beta cannot be less than asset beta. So, 0.8 cannot be the correct measure of asset beta or business risk.

The correct option is B "0.8".

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