Which of the following statements is correct?
A) A company with access to global capital markets should have a lower cost of equity than a purely domestic company because equity risk is shared among a greater number of investors who have different risk requirements, thus magnifying the diversification effect.
B) A company with access to global capital markets should use a global market index instead of a purely domestic one to reflect the greater diversification potential of international markets.
C) The beta coefficient of a company with access to global capital markets should be computed against the global market index and will likely be lower than if a domestic index were used because of lower correlation.
D) All of the statements above are correct.
E) Only statements a and b are correct.
Correct Answer:
Verified
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