The pure play method estimates the beta of the proposed project based on information from firms that are in similar lines of business as the project. If the capital budgeting project involves an expansion to another country, perhaps a firm in that country will qualify as a pure play. The project’s systematic risk can be estimated by regressing the foreign firm’s stock market returns on those of a US market index. The foreign firm’s stock returns should be adjusted for exchange rate fluctuations, so exchange rate risk is included in the analysis. The main drawback to the pure play method is that the analyst must find one or more publicly traded firms that are close proxies to the project under review. Only for publicly traded firms can the analyst find stock return data from which to estimate beta. The ideal proxy firms are singleproduct firms so the analysis can focus on the systematic risk of the particular project under consideration. A firm with many different product lines will complicate the comparison, as its betas will reflect the systematic risk of the firm’s overall product mix, rather than the project’s line of business.