Which of the Following Statements Is Correct

question 102

Multiple Choice

Which of the following statements is correct?

• A) A relatively risky future cash outflow should be evaluated using a relatively low discount rate.
• B) If a firm's managers want to maximize the value of the stock,they should concentrate exclusively on projects' market,or beta,risk.
• C) If a firm evaluates all projects using the same required rate of return to determine NPVs,then the riskiness of the firm as measured by its beta will probably decline over time.
• D) If a firm has a beta which is less than 1.0,say 0.9,this would suggest that its assets' returns are negatively correlated with the returns of most other firms' assets.
• E) The above statements are all false.

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Definitions:

Hot Spot

A region with significant volcanic activity due to a mantle plume or other geological features.

Molten Rock

Molten rock, also known as magma (beneath the earth's surface) or lava (on the earth's surface), is a hot, fluid state of rocks that have melted due to high temperatures within the Earth.

Giant Arthropods

Large, extinct or extant invertebrates within the arthropod phylum, such as some ancient insects or land-dwelling crustaceans.

Carboniferous

A geological period approximately 359 to 299 million years ago, characterized by the widespread presence of coal-bearing deposits.