(Multiple Choice) If a firm applies its overall firm's beta to projects with varying levels of...
(Multiple Choice) If a firm applies its overall firm's beta to projects with varying levels of risk, the firm will tend to:
-remain at its current level of overall risk.
-become riskier over time.
-reject the riskiest projects.
-accept all low-risk projects.
-accept only projects of equal risk to its current operations.
Homework Answers
become riskier over time
If the firm applies overall firm's beta and thus overall firm's
cost of capital, then low risk projects would be incorrectly
rejected and high risk projects would be incorrectly accepted thus
increasing the overall risk of the firm
Add Answer to:
(Multiple Choice) If a firm applies its overall firm's beta to
projects with varying levels of...
If a firm applies its overall firm's beta to projects with varying levels of risk, the...
If a firm applies its overall firm's beta to projects with varying levels of risk, the firm will tend to: a. accept all low risk projects b. accept only projects of equal risk to its current operations c. become riskier over time d. reject the riskiest projects e. remain at its current level of overall risk
29. If a firm applies its overall cost of capital to all its proposed projects, then...
29. If a firm applies its overall cost of capital to all its proposed projects, then the divisions within the firm will tend to A) receive more B) avoid risky projects so that they will receive more funding. C) become less risky over time based on the projects that are accepted. D) have equal probabilities of receiving funding for their projects. . E) propose less risky projects than if separate discount rates were applied funding if they represent the riskiest...
If a firm uses its WACC as the discount rate for all of the projects it...
If a firm uses its WACC as the discount rate for all of the projects it undertakes then the firm will tend to: I. reject some positive net present value projects, II. accept some negative net present value projects. III. favor low risk projects over high risk projects. IV. become riskier over time. O A. I and III only B. III and IV only C I and II only I, II, and IV only I, II, III, and IV OD...
True or False question The after-tax cost of debt generally increases when a firm's bond rating...
True or False question The after-tax cost of debt generally increases when a firm's bond rating decreases. The weighted average cost of capital for a firm is the discount rate which the firm should apply to all of the projects it undertakes. Assigning discount rates to individual projects based on the risk level of each project may cause the firm's overall weighted average cost of capital to either increase or decrease over time. Other things being equal, the weighted average...
Norris Enterprises, an all-equity firm, has a beta of 2.0. The chief financial officer is evaluating a project with...
Norris Enterprises, an all-equity firm, has a beta of 2.0. The chief financial officer is evaluating a project with an expected return of 14%, before any risk adjustment. The risk-free rate is 5%, and the market risk premium is 4%. The project being evaluated is riskier than the firm's average project, in terms of both its beta risk and its total risk. Which of the following statements is CORRECT? a. Riskier-than-average projects should have their expected returns increased to reflect...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Aa Aa Understanding risks that affect projects and the impact...
6. Within-firm risk and beta risk Aa Aa Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Garcia Real Estate is involved in commercial real estate ventures throughout the United States. Some of these ventures are much riskier than other ventures because of market conditions in different regions of the country. If Garcia does not risk-adjust its discount rate for specific ventures properly, which of the following is likely to occur over time? Check all that apply The firm will...
29. If a firm applies its overall cost of capital to all its proposed projects, then the divisions within the firm will tend to A) receive more B) avoid risky projects so that they will receive more funding. C) become less risky over time based on the projects that are accepted. D) have equal probabilities of receiving funding for their projects. . E) propose less risky projects than if separate discount rates were applied funding if they represent the riskiest...
If a firm uses its WACC as the discount rate for all of the projects it undertakes then the firm will tend to: I. reject some positive net present value projects, II. accept some negative net present value projects. III. favor low risk projects over high risk projects. IV. become riskier over time. O A. I and III only B. III and IV only C I and II only I, II, and IV only I, II, III, and IV OD...
Norris Enterprises, an all-equity firm, has a beta of 2.0. The chief financial officer is evaluating a project with an expected return of 14%, before any risk adjustment. The risk-free rate is 5%, and the market risk premium is 4%. The project being evaluated is riskier than the firm's average project, in terms of both its beta risk and its total risk. Which of the following statements is CORRECT? a. Riskier-than-average projects should have their expected returns increased to reflect...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Aa Aa Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions...
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Garcia Real Estate is involved in commercial real estate ventures throughout the United States. Some of these ventures are much riskier than other ventures because of market conditions in different regions of the country. If Garcia does not risk-adjust its discount rate for specific ventures properly, which of the following is likely to occur over time? Check all that apply The firm will...
Most questions answered within 3 hours.
-
Assume one of your finals has 50 questions on it, and
lucky for you, it's all...
asked 1 hour ago -
Rice Products in Bangladesh
Business behavior is derived in large part from the basic cultural
environment...
asked 2 hours ago -
The following base sequence is found for a mRNA fragment from
wild-type E. coli: 5'- UAUCAGUAGAUAAUGUAACC-3'...
asked 2 hours ago -
For this exercise, round all regression parameters to three
decimal places.
One of the two tables...
asked 3 hours ago -
What is the 5% level of significance for mean = 3.60, standard
deviation = 0.94, and...
asked 3 hours ago -
Prior to beginning work on this discussion, please read the
article by Hayley Peterson, 15 Companies...
asked 3 hours ago -
Which pair of aqueous solutions, when mixed, will form a
precipitate?
A) NaNO3 and AgC2H3O2
B)...
asked 4 hours ago -
1-Write an algorithm to get two numbers from the user (as
inputs) and calculate the sum...
asked 7 hours ago -
Define white-collar crime. What is the difference between
offender and offense-based definitions of white-collar crime? What...
asked 8 hours ago -
Consider a reaction which is 1st order with respect to A and 1st
order with respect...
asked 8 hours ago -
c++
The length of the hypotenuse of a right-angled triangle is the
square root of the...
asked 8 hours ago -
When a metal rod is heated, not only its resistance but also its
length and crossâsectional...
asked 8 hours ago