Taussig Technologies is considering two potential projects, X and Y. In assessing the projects' risks, the company estimated the beta of each project versus both the company's other assets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data: Project X Project Y Expected NPV $350,000 $350,000 Standard deviation (ONPV) $100,000 $150,000 Project beta (vs. market) 1.4 0.8 Correlation of the project Cash flows are not cash flows with cash flows correlated with the cash correlated with the cash from currently existing projects. Which of the following statements is CORRECT? Cash flows are highly flows from existing projects. flows from existing projects. O a. Project X has more corporate.for within-firm) risk than Project Y. O b. Project X has more stand.alone risk than Project Y. O c Project X has the same market risk as Project Y since its cash flows are not correlated with the cash flows of existing projects. O d. Project X has more market risk than Project Y. e. Project X has the same level of corporate risk as Project Y.

Taussig Technologies is considering two potential projects, X and Y. In assessing the projects' risks, the company estimated the beta of each project versus both the company's other assets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data: Project X Project Y Expected NPV $350,000 $350,000 Standard deviation (ONPV) $100,000 $150,000 Project beta (vs. market) 1.4 0.8 Correlation of the project Cash flows are not cash flows with cash flows correlated with the cash correlated with the cash from currently existing projects. Which of the following statements is CORRECT? Cash flows are highly flows from existing projects. flows from existing projects. O a. Project X has more corporate.for within-firm) risk than Project Y. O b. Project X has more stand.alone risk than Project Y. O c Project X has the same market risk as Project Y since its cash flows are not correlated with the cash flows of existing projects. O d. Project X has more market risk than Project Y. e. Project X has the same level of corporate risk as Project Y.

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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