9 - 9. If the Plastics Division continued to make...

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9. If the Plastics Division continued to make relatively heavy investments in risky projects, it would eventually impact the overall portfolio of projects, making the project portfolio higher risk as well. The beta would go up and the overall cost of capital would also increase. These effects on the corporate beta would depend on the amount of risk taken on by the Plastics Division and the overall percentage of projects that the Plastics Division makes up in the company overall. These effects could be relatively immediate or take somewhat longer to affect the company. Through investigation by analysts could uncover the riskiness of these projects and be reported as an increase in corporate beta almost immediately. Otherwise, corporate beta may not be affected until projects end and the impact on the Plastics Division earnings can be evaluated. Could you please check the anwser below if it is correct, if not please help me fix the errors for number 12. 12. a.
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This document was uploaded on 03/26/2012.

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