Whether the following project has similar risk to that of average risk of the firm. Introduction: Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

Question

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Answer 1

Question

Chapter 18, Problem 1P

a)

Summary Introduction

To determine: Whether the following project has similar risk to that of average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

a)

Expert Solution

Explanation of Solution

Given information:

Company C considers initiation of a new version of Armour, all designed to protect notebook computers and to clean.

Explanation:

Though there might be few differences, the market risk of the cash flows from this new products is expected to be similar to Clorox’s other household products. Thus, it is reasonable to accept that it has the similar risk similar to the average risk of the firm.

b)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

b)

Expert Solution

Explanation of Solution

Given information:

Company G plans to expand its headquarters by purchasing real estate.

Explanation:

A real estate investment has different market risks compared to Company G investment in advertising and internet search technology. It is not right to assume this investment has risk equal to the average risk of the firm.

c)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

c)

Expert Solution

Explanation of Solution

Given information:

Company T decides to enlarge the number of stores in the south eastern Country U.

Explanation:

Company T expands its business in the same line, which is likely to have the risk similar to the average risk of the firm.

d)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance that an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

d)

Expert Solution

Explanation of Solution

Given information:

Company GE decides to open a new U studio theme park in Country C.

Explanation:

The theme park is expected be sensitive in the development of the Country C economy. Its risk might be different from Company GE’s other divisions and from the company as a whole. It is not right to assume this investment had risk similar to the average risk of the firm.

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Answer 2

Question

Chapter 18, Problem 1P

a)

Summary Introduction

To determine: Whether the following project has similar risk to that of average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

a)

Expert Solution

Explanation of Solution

Given information:

Company C considers initiation of a new version of Armour, all designed to protect notebook computers and to clean.

Explanation:

Though there might be few differences, the market risk of the cash flows from this new products is expected to be similar to Clorox’s other household products. Thus, it is reasonable to accept that it has the similar risk similar to the average risk of the firm.

b)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

b)

Expert Solution

Explanation of Solution

Given information:

Company G plans to expand its headquarters by purchasing real estate.

Explanation:

A real estate investment has different market risks compared to Company G investment in advertising and internet search technology. It is not right to assume this investment has risk equal to the average risk of the firm.

c)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

c)

Expert Solution

Explanation of Solution

Given information:

Company T decides to enlarge the number of stores in the south eastern Country U.

Explanation:

Company T expands its business in the same line, which is likely to have the risk similar to the average risk of the firm.

d)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance that an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

d)

Expert Solution

Explanation of Solution

Given information:

Company GE decides to open a new U studio theme park in Country C.

Explanation:

The theme park is expected be sensitive in the development of the Country C economy. Its risk might be different from Company GE’s other divisions and from the company as a whole. It is not right to assume this investment had risk similar to the average risk of the firm.

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Answer 3

Question

Chapter 18, Problem 1P

a)

Summary Introduction

To determine: Whether the following project has similar risk to that of average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

a)

Expert Solution

Explanation of Solution

Given information:

Company C considers initiation of a new version of Armour, all designed to protect notebook computers and to clean.

Explanation:

Though there might be few differences, the market risk of the cash flows from this new products is expected to be similar to Clorox’s other household products. Thus, it is reasonable to accept that it has the similar risk similar to the average risk of the firm.

b)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

b)

Expert Solution

Explanation of Solution

Given information:

Company G plans to expand its headquarters by purchasing real estate.

Explanation:

A real estate investment has different market risks compared to Company G investment in advertising and internet search technology. It is not right to assume this investment has risk equal to the average risk of the firm.

c)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

c)

Expert Solution

Explanation of Solution

Given information:

Company T decides to enlarge the number of stores in the south eastern Country U.

Explanation:

Company T expands its business in the same line, which is likely to have the risk similar to the average risk of the firm.

d)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance that an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

d)

Expert Solution

Explanation of Solution

Given information:

Company GE decides to open a new U studio theme park in Country C.

Explanation:

The theme park is expected be sensitive in the development of the Country C economy. Its risk might be different from Company GE’s other divisions and from the company as a whole. It is not right to assume this investment had risk similar to the average risk of the firm.

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Answer 4

Question

Chapter 18, Problem 1P

a)

Summary Introduction

To determine: Whether the following project has similar risk to that of average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

a)

Expert Solution

Explanation of Solution

Given information:

Company C considers initiation of a new version of Armour, all designed to protect notebook computers and to clean.

Explanation:

Though there might be few differences, the market risk of the cash flows from this new products is expected to be similar to Clorox’s other household products. Thus, it is reasonable to accept that it has the similar risk similar to the average risk of the firm.

b)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

b)

Expert Solution

Explanation of Solution

Given information:

Company G plans to expand its headquarters by purchasing real estate.

Explanation:

A real estate investment has different market risks compared to Company G investment in advertising and internet search technology. It is not right to assume this investment has risk equal to the average risk of the firm.

c)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

c)

Expert Solution

Explanation of Solution

Given information:

Company T decides to enlarge the number of stores in the south eastern Country U.

Explanation:

Company T expands its business in the same line, which is likely to have the risk similar to the average risk of the firm.

d)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance that an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

d)

Expert Solution

Explanation of Solution

Given information:

Company GE decides to open a new U studio theme park in Country C.

Explanation:

The theme park is expected be sensitive in the development of the Country C economy. Its risk might be different from Company GE’s other divisions and from the company as a whole. It is not right to assume this investment had risk similar to the average risk of the firm.

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Answer 5

Chapter 18, Problem 1P

a)

Summary Introduction

To determine: Whether the following project has similar risk to that of average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

a)

Expert Solution

Explanation of Solution

Given information:

Company C considers initiation of a new version of Armour, all designed to protect notebook computers and to clean.

Explanation:

Though there might be few differences, the market risk of the cash flows from this new products is expected to be similar to Clorox’s other household products. Thus, it is reasonable to accept that it has the similar risk similar to the average risk of the firm.

b)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

b)

Expert Solution

Explanation of Solution

Given information:

Company G plans to expand its headquarters by purchasing real estate.

Explanation:

A real estate investment has different market risks compared to Company G investment in advertising and internet search technology. It is not right to assume this investment has risk equal to the average risk of the firm.

c)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

c)

Expert Solution

Explanation of Solution

Given information:

Company T decides to enlarge the number of stores in the south eastern Country U.

Explanation:

Company T expands its business in the same line, which is likely to have the risk similar to the average risk of the firm.

d)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance that an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

d)

Expert Solution

Explanation of Solution

Given information:

Company GE decides to open a new U studio theme park in Country C.

Explanation:

The theme park is expected be sensitive in the development of the Country C economy. Its risk might be different from Company GE’s other divisions and from the company as a whole. It is not right to assume this investment had risk similar to the average risk of the firm.

Answer 6

Chapter 18, Problem 1P

a)

Summary Introduction

To determine: Whether the following project has similar risk to that of average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

a)

Expert Solution

Explanation of Solution

Given information:

Company C considers initiation of a new version of Armour, all designed to protect notebook computers and to clean.

Explanation:

Though there might be few differences, the market risk of the cash flows from this new products is expected to be similar to Clorox’s other household products. Thus, it is reasonable to accept that it has the similar risk similar to the average risk of the firm.

Answer 7

Chapter 18, Problem 1P

a)

Summary Introduction

To determine: Whether the following project has similar risk to that of average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

Answer 8

a)

Expert Solution

Explanation of Solution

Given information:

Company C considers initiation of a new version of Armour, all designed to protect notebook computers and to clean.

Explanation:

Though there might be few differences, the market risk of the cash flows from this new products is expected to be similar to Clorox’s other household products. Thus, it is reasonable to accept that it has the similar risk similar to the average risk of the firm.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

b)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

b)

Expert Solution

Explanation of Solution

Given information:

Company G plans to expand its headquarters by purchasing real estate.

Explanation:

A real estate investment has different market risks compared to Company G investment in advertising and internet search technology. It is not right to assume this investment has risk equal to the average risk of the firm.

Answer 13

b)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

Answer 14

b)

Expert Solution

Explanation of Solution

Given information:

Company G plans to expand its headquarters by purchasing real estate.

Explanation:

A real estate investment has different market risks compared to Company G investment in advertising and internet search technology. It is not right to assume this investment has risk equal to the average risk of the firm.

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

c)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

c)

Expert Solution

Explanation of Solution

Given information:

Company T decides to enlarge the number of stores in the south eastern Country U.

Explanation:

Company T expands its business in the same line, which is likely to have the risk similar to the average risk of the firm.

Answer 19

c)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

Answer 20

c)

Expert Solution

Explanation of Solution

Given information:

Company T decides to enlarge the number of stores in the south eastern Country U.

Explanation:

Company T expands its business in the same line, which is likely to have the risk similar to the average risk of the firm.

Answer 21

c)

Expert Solution

Answer 22

c)

Expert Solution

Answer 23

Expert Solution

Answer 24

d)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance that an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

d)

Expert Solution

Explanation of Solution

Given information:

Company GE decides to open a new U studio theme park in Country C.

Explanation:

The theme park is expected be sensitive in the development of the Country C economy. Its risk might be different from Company GE’s other divisions and from the company as a whole. It is not right to assume this investment had risk similar to the average risk of the firm.

Answer 25

d)

Summary Introduction

To determine: Whether the following project has a similar risk to that of the average risk of the firm.

Introduction:

Risk includes the chance that an investment’s real return will vary from the expected return. Risk includes the probability of losing all the original investment or losing some. Risk can be classified into unsystematic risk or systematic risk.

Answer 26

d)

Expert Solution

Explanation of Solution

Given information:

Company GE decides to open a new U studio theme park in Country C.

Explanation:

The theme park is expected be sensitive in the development of the Country C economy. Its risk might be different from Company GE’s other divisions and from the company as a whole. It is not right to assume this investment had risk similar to the average risk of the firm.