Part 1: Search for the beta of your company P&G from Yahoo Finance or any other websites. In addition, find the beta of 3 different companies within the same industry as your company P&G. Explain what beta means and how it can be used for managerial and/or investment decision. Why do you think the beta of your company (P&G) and those of the 3 companies you found are different from each other? Provide as much information as you can and be specific.
Part 2: Capital Budgeting
To avoid damaging its market value, each company must use the correct discount rate to evaluate its projects. Review and discuss the following:
Compare and contrast the internal rate of return approach to the net present value approach. Which is better? Support your answer with well-reasoned arguments and examples.
Is the ultimate goal of most companies--maximizing the wealth of the owners for whom the firm is being operated--ethical? Why or why not?
Why might ethical companies benefit from a lower cost of capital than less ethical companies?
Sample Solution