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Which of the following companies is likely to have a higher beta, and thus a higher cost of capital? a. An auto manufacturer who runs an assembly line with union workers b. A "high-tech" auto...

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Which of the following companies is likely to have a higher beta, and thus a higher cost of capital?

a. An auto manufacturer who runs an assembly line with union workers

b. A "high-tech" auto manufacturer with a fully automated line requiring only a handful of non-union workers.

Answered Same Day Dec 25, 2021

Solution

David answered on Dec 25 2021
121 Votes
Solution-
a. An auto manufacturer who runs an assembly line with union workers
Explanation-
Generally, auto manufactures have higher beta because they run assembly lines with the union workers and they tend to have higher cost of capital when compared to the auto manufacturer who makes use of...
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