Taussig Technologies Is Considering Two Potential Projects, X and Y

question 5

Multiple Choice

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: Which of the following statements is CORRECT?

• A) Project X has more stand-alone risk than Project Y.
• B) Project X has more corporate (or within-firm) risk than Project Y.
• C) Project X has more market risk than Project Y.
• D) Project X has the same level of corporate risk as Project Y.
• 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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Definitions:

Process Cost System

An accounting system used to track costs in industries where production is continuous and processes are uniform, assigning costs to units of output.

Equivalent Units

A concept used in cost accounting to convert partially completed goods into a number of complete units of output.

Production Cost Report

A document that outlines the total cost and production data for a specific period, typically used in process costing systems.

Equivalent Units

A standardization method used in cost accounting to express production activity of various products in terms of a single, common 'equivalent unit'.