Currently,Powell Products Has a Beta of 1

question 72

Multiple Choice

Currently,Powell Products has a beta of 1.0,and its sales and profits are positively correlated with the overall economy.The company estimates that a proposed new project would have a higher standard deviation and coefficient of variation than an average company project.Also,the new project's sales would be countercyclical in the sense that they would be high when the overall economy is down and low when the overall economy is strong.On the basis of this information,which of the following statements is CORRECT?

• A) The proposed new project would have more stand-alone risk than the firm's typical project.
• B) The proposed new project would increase the firm's corporate risk.
• C) The proposed new project would increase the firm's market risk.
• D) The proposed new project would not affect the firm's risk at all.
• E) The proposed new project would have less stand-alone risk than the firm's typical project.

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Definitions:

Pinna

The pinna is the visible part of the ear that is outside the head, which helps in collecting sound vibrations near the ear, directing them into the ear canal.

Straighten

To make something orderly or aligned; to correct from a bent or twisted position.

Ear Canal

The narrow tube through which sound waves travel from the outer ear to the eardrum.

Up And Back

A technique often used for administering ear drops or examining the ear, where the ear is pulled upward and backward to straighten the ear canal.