Taussig Technologies Is Considering Two Potential Projects,X and Y ?
Which of the Following Statements Is CORRECT?
A) Project

question 80

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: $\begin{array}{lll}&\text { Project } \mathrm{X}&\text { Project } \mathrm{Y}\\\text { Expected NPV } & \$ 350,000 & \$ 350,000 \\\text { Standard deviation (oNPV) } & \$ 100,000 & \$ 150,000 \\\text { Project beta (vs. market) } & 1.4 & 0.8\\\text { Correlation of the project cash flows }&\text { Cash flows are not correlated }&\text { Cash flows are highly correl ated }\\\text { with cash flows from currently }&\text { with the cash flows from }&\text { with the cash flows from }\\\text { existing projects. }&\text { existing projects. }&\text { existing projects. }\\\end{array}$
?
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:

Stimulus Generalization

The process by which a conditioned response is triggered by stimuli that are similar, but not identical, to the original conditioned stimulus.

Discriminative Learning

The process by which an individual learns to respond differently to different stimuli based on their experiences or consequences of their actions.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome.

Contiguous

Being in close proximity or contact with something else, often implying physical touching or adjacency.