Generally, a positive correlation exists between a project's returns and the returns on the firm's other assets. If this correlation is risk will be a good proxy for within-firm risk. Consider the case of another company. Chrome Printing is evaluating two mutually exclusive projects. They both require a $1 million investment today and have expected NPVS of $200,000. Management conducted a full risk analysis of these two projects, and the results are shown below. Risk Measure Standard deviation of project's expected NPVS Project beta Correlation coefficient of project cash flows (relative to the firm's existing projects) Project A has more market risk than Project B. O Project A has more stand-alone risk than Project B. Project B has more stand-alone risk than Project A. Project A $80,000 Which of the following statements about these projects' risk is correct? Check all that apply. Project A has more corporate risk than Project B. 0.9 0.6 Project B $120,000 stand-alone 0.7 0.8

Generally, a positive correlation exists between a project's returns and the returns on the firm's other assets. If this correlation is risk will be a good proxy for within-firm risk. Consider the case of another company. Chrome Printing is evaluating two mutually exclusive projects. They both require a $1 million investment today and have expected NPVS of $200,000. Management conducted a full risk analysis of these two projects, and the results are shown below. Risk Measure Standard deviation of project's expected NPVS Project beta Correlation coefficient of project cash flows (relative to the firm's existing projects) Project A has more market risk than Project B. O Project A has more stand-alone risk than Project B. Project B has more stand-alone risk than Project A. Project A $80,000 Which of the following statements about these projects' risk is correct? Check all that apply. Project A has more corporate risk than Project B. 0.9 0.6 Project B $120,000 stand-alone 0.7 0.8

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 12P

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