Question

Describe in a short paragraph (less than half a page) what risks/events may cause Kidman’s resources beta to significantly change. Assume due to some event (as you may have described), the beta of kidman’s Resources is now 30 % lower than your original estimates. Would this change your previous analysis? Describe.

Beta value is : 1.32

Answer 1

Ans: While making a Investment in a company we need to consider two factors one is a industry specific in which the company is operating for example the auto industry in which Ford is one company and while making investment decisions are made we need to make sure about the growth and return in that particular sector.

On the other hand we had a market risk which is effected by the economic and political factor of a country the better it is the better the growth will be economically and politically and the risk associated with it is measured in the for of beta and it is measure as one or less than one is a less volatile company or with low risk and beta more than one is more volatile or risky companies to invest with.

But even after reducing the beta by 30 % The Kidman Resource beta is more than 1 i.e 1.32 so the company is still volatile and risky to invest.