Multidivisional companies unable to obtain a surrogate beta for estimating a division's risk-adjusted rate of return sometimes can estimate beta from internal accounting data. This approach is called the pure play method.

Question

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The pure play method involves finding a beta from a single, publicly traded company (or a group of companies) that focuses solely on the line of business similar to the division being analyzed, not from internal accounting data.

Multidivisional Companies Unable to Obtain a Surrogate Beta for Estimating