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Briefly describe the factors that determine asset betas.

Briefly describe the factors that determine asset betas.

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Answer #1

Factors that determine asset betas :
1. Asset beta is dependent on the fixed costs . Higher is the fixed cost higher is the asset betas.
2. It is affected by financial leverage . Higher the financial leverage higher will be in beta.
3. The Variations or risk in cash flows is another important factor that determines asset betas.

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