Define “pure play” as it applies to assigning a beta to a project. Und

Define “pure play” as it applies to assigning a beta to a project. Under what circumstances do you think the pure-play approach to assigning project betas would be particularly useful?

What will be an ideal response?

ANSWER

Answer: Pure play is the art of determining the beta of an individual project by matching it to a publicly traded company whose sole business is similar to the project’s. This technique is particularly useful when a company is looking to expand its business into an area where it has no internal projects that it can use for estimating the new project’s beta.