Multidivisional Firms Are Often Unable to Obtain an Appropriate Surrogate

Multiple Choice

Multidivisional firms are often unable to obtain an appropriate surrogate for determining the beta of a division. An acceptable alternative technique is to develop a beta through the division's accounting records. This is accomplished by:

A) regressing the division's projected return on equity against the return on a major company in a similar business.
B) regressing the division's accounting return on equity in previous years against the return on a major stock market index.
C) regressing the division's projected return on equity against the historic return on a major stock market index.
D) None of the above