Tallant Technologies Is Considering Two Potential Projects, X and Y

question 47

Multiple Choice

Tallant 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: $$\begin{array} { l r r } & \text { Froject X } & \text { Froject Y } \\\text { Expected NPV } & \$ 500,000 & \$ 500,000 \\\text { Standard deviation (oNPV) } & \$ 200,000 & \$ 250,000 \\\text { Project beta (vs. market) } & 1.4 & 0.8\end{array}$$ Correlation of the project cash flows with cash flows from currently existing projects.Cash flows are not correlated with the cash flows from existing projects.Cash flows are highly correlated with the cash flows from existing projects. Which of the following statements is CORRECT?

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

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Definitions:

Regulation of Body Temperature

The physiological process that maintains the body temperature within a certain range, despite environmental changes.

Endotherms

Organisms that regulate their body temperature internally through metabolic processes.

Causes Deviation

Factors that lead to differences or changes in a standard pattern or path.

Glial Cells

Non-neuronal cells in the central and peripheral nervous system that provide support and protection for neurons.