Taussig Technologies Is Considering Two Potential Projects, X and Y

question 51

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

Identify factors that can affect the validity of research, including confounding variables and operational definitions.

Distinguish between different types of research designs and their implications for cause-and-effect relationships.

Understand the role of randomness in experiments, including random sampling and random assignment.

Comprehend the ethical and practical considerations of using accomplices in research.

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Definitions:

Communication Model

A framework for understanding how messages are sent, received, and processed between communicators.

Information Flows

The movement or transfer of information within an organization, which can be upward, downward, or lateral, affecting decision-making and coordination.

Channels

Pathways or mediums through which information, goods, or services are delivered from a sender to a receiver.

Nonverbal Communication

The transmission of messages or information through means other than verbal language, including body language, gestures, and facial expressions.