CAPM: If a company based in the U.S. dramatically increases its percentage of international sales, would...
Homework Answers
| Yes, definitely company based on U. S. dramatically increases its percentage of international sales | |||||||||
| will effect the company's Beta. | |||||||||
| 1. The question in the context points out about the "International Beta" | |||||||||
| 2. Firstly it is important it know what is " International Beta". It means measuring your | |||||||||
| company stock Risk or Volatility to a Global Index Market. | |||||||||
| 3. This International Beta Specifically applies to companies those who does cross border | |||||||||
| transactions (Transactions Like Operational, Financial and Investing) | |||||||||
| 4. In this context the cost of equity can be determined considering Global index Value. | |||||||||
| (Capital Asset Pricing Model can be used for calculating Expected Return (Ke)) | |||||||||
| 5. In this case, the additional consideration would be for "changes in foreign currency" | |||||||||
| apart from Risk free return and premium for taking risk of particular stock to market risk. | |||||||||
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CAPM: If a company based in the U.S. dramatically increases its
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