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QUESTION 34 ed Hill 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 ssets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data: Expected NPV Standard deviation (ONPV) Project beta (vs. market) Correlation of the project cash lows with cash flows from urrently existing projects Project X $350,000 $100,000 1.4 Cash flows are not correlated with the cash flows from existing projects Which of the following statements is CORRECT? Project Y $350,000 $150,000 0.8 Cash flows are highly correlated with the cash flows from existing projects

QUESTION 34 ed Hill 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 ssets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data: Expected NPV Standard deviation (ONPV) Project beta (vs. market) Correlation of the project cash lows with cash flows from urrently existing projects Project X $350,000 $100,000 1.4 Cash flows are not correlated with the cash flows from existing projects Which of the following statements is CORRECT? Project Y $350,000 $150,000 0.8 Cash flows are highly correlated with the cash flows from existing projects

Essentials of Business Analytics (MindTap Course List)
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter3: Data Visualization
Section: Chapter Questions
Problem 18P: The Ajax Company uses a portfolio approach to manage their research and development (RD) projects....
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QUESTION 34 Red Hill 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: Expected NPV Standard deviation (ONPV) Project beta (vs. market) Correlation of the project cash flows with cash flows from currently existing projects Project X $350,000 $100,000 1.4 Cash flows are not correlated with the cash flows from existing projects Which of the following statements is CORRECT? Project Y $350,000 $150,000 0.8 Cash flows are highly correlated with the cash flows from existing projects a. Project X has more stand-alone risk than Project Y. O b. Project X has more corporate (or within-firm) risk than Project Y. O c. Project X has more market risk than Project Y. O d. Project X has the same level of corporate risk as Project Y. O e. Project X has the same market risk as Project Y since its cash flows are not correlated with the cash flows of existing projects.
Transcribed Image Text:QUESTION 34 Red Hill 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: Expected NPV Standard deviation (ONPV) Project beta (vs. market) Correlation of the project cash flows with cash flows from currently existing projects Project X $350,000 $100,000 1.4 Cash flows are not correlated with the cash flows from existing projects Which of the following statements is CORRECT? Project Y $350,000 $150,000 0.8 Cash flows are highly correlated with the cash flows from existing projects a. Project X has more stand-alone risk than Project Y. O b. Project X has more corporate (or within-firm) risk than Project Y. O c. Project X has more market risk than Project Y. O d. Project X has the same level of corporate risk as Project Y. O e. Project X has the same market risk as Project Y since its cash flows are not correlated with the cash flows of existing projects.
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