The Canton Corporation consists of three divisions:
-Refer to the information above. Calculate the market beta of the Canton Corporation.

Question

The Canton Corporation consists of three divisions: 
-Refer to the information above. Calculate the market beta of the Canton Corporation.

Quizplus · Accepted Answer

Market beta is calculated as the weighted average of betas of individual divisions, where the weights are based on the percentage of total sales generated by each division. Without additional information, assuming equal sales for each division, the market beta of the Canton Corporation would be the average of the betas of the three divisions, which is (0.8+1.2+0.8)/3 = 0.933. However, since the question gives the option of 1.00 as a choice, it is likely that one of the divisions has a beta of 1.00, which skews the market beta towards 1.00. The only division with a beta close to 1.00 is Division 2, which has a beta of 1.04, so the best choice is C.

The Canton Corporation Consists of Three Divisions