A Firm Is Considering a New Project Whose Risk Is

question 48

Multiple Choice

A firm is considering a new project whose risk is greater than the risk of the firm's average project,based on all methods for assessing risk.In evaluating this project,it would be reasonable for management to do which of the following?

• A) Increase the estimated IRR of the project to reflect its greater risk.
• B) Increase the estimated NPV of the project to reflect its greater risk.
• C) Reject the project,since its acceptance would increase the firm's risk.
• D) Ignore the risk differential if the project would amount to only a small fraction of the firm's total assets.
• E) Increase the cost of capital used to evaluate the project to reflect its higher-than-average risk.

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Definitions:

Cultural Value Statements

Declarations that communicate the core principles and ethical standards that guide the behavior, decisions, and actions of an organization or community.

Diversity

The inclusion of individuals representing more than one national origin, color, religion, socioeconomic stratum, sexual orientation, etc., in a group or organization.

Creativity

The ability to produce original and valuable ideas.

Marketing Strategies

Plans developed by organizations to promote and sell their products or services to targeted audiences.