10.6 Supposethat Apex Health Services has four different projects. These projects arelisted below, along with the amount of capital invested and estimated corporateand market betas: Project Amount...

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10.6



Suppose that Apex Health Services has four different projects. These projects are listed below, along with the amount of capital invested and estimated corporate and market betas:








































Project




Amount Invested




Corporate Beta




Market Beta



Walk - In Clinic



500000



1.5



1.1



MRI Facility



2000000



1.2



1.5



Clinical Laboratory



1500000



0.9



0.8



X-ray Laboratory



1000000



0.5



1



$5000000


========




a.
Why do the corporate and market betas differ for the same project?



b.
What is the overall corporate beta of Apex Health Services? Is the calculated beta consistent with the corporate risk theory?



c.
What is the overall market beta of Apex Health Services?



d.
How does the riskiness of Apex’s stock compare with the riskiness of an average stock?



e. Would stock investors require a rate of return on Apex that is greater than, less than, or the same as the return on an average stock?



Answered Same DayDec 22, 2021

Answer To: 10.6 Supposethat Apex Health Services has four different projects. These projects arelisted below,...

Robert answered on Dec 22 2021
123 Votes
Solution:-
a. Why do the corporate and market betas differ for the same project?
The difference in corporate and market beta is due to the macro level factors such as government
policies, global activities, market condition, issues in other industries both inside and outside the
country etc. Due to these macro level factors the market beta and the corporate beta differs with each
other.
b. What is the overall corporate beta of Apex Health Services? Is the calculated beta consistent
with the corporate risk theory?
Project Investment (a) Corporate Beta (b) a*b
Walk - In Clinic $ 500,000 1.5 $ ...
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