What is the relationship between beta and discount rate?



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Hi.
High Beta Company (higher risk) => Higher discount rate => Lower NPV
Low Beta Company (lower risk)=> Lower Discount Rate => Higher NPV

But isn't the risk factor directly proportional with the costs involved?

2 Answer(s)


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Ishan, Sorry I dont understand your question. When you say risk is proportional to costs - what costs are you referring to ?

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