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:

Corporation

A legal entity that exists separately from its owners.

Legal Entity

Any organization that possesses separate legal personality from its members, such as corporations, partnerships, and sole proprietorships.

Personal Liability

The legal responsibility of an individual to bear the cost of damages or debt incurred through their actions or ownership.

Sole Proprietorship

A business owned and operated by a single individual, with no legal distinction between the owner and the business.