An example of an external factor that affects a corporation's risk or beta, and hence required rate of return would be
A) a financing mix.
B) a change in top management.
C) an asset mix.
D) inflation.

Question

Quizplus · Accepted Answer

Inflation is an external factor that affects a corporation's risk or beta because it can impact the purchasing power of the company's cash flows and cause market uncertainties. As a result, investors may demand a higher rate of return to compensate for the increased risk, leading to an increase in the corporation's required rate of return.  A, B, and C are internal factors that affect a corporation's risk or beta, such as a change in financing or asset mix or a change in top management, but they do not directly impact the overall market risk and required rate of return.

An Example of an External Factor That Affects a Corporation's