Which of the Following Statements About Project Risk Analysis in Not-For-

question 2

Multiple Choice

Which of the following statements about project risk analysis in not-for- profit firms is incorrect?

• A) The market risk of a project is not relevant to not-for-profit firms.
• B) A project's corporate beta measures the contribution of the project to the overall corporate risk of the firm.
• C) A project's corporate beta is found (at least conceptually) by regressing returns on the project against returns on the market portfolio.
• D) A project's corporate beta is defined as (\(\sigma\)P/\(\sigma\)F)rPF, where \(\sigma\)P is the standard deviation of the project's returns, \(\sigma\)F is the standard deviation of the firm's returns, and rPF is the correlation among the two sets of returns.
• E) In practice, it is usually difficult, if not impossible, to directly measure a project's corporate risk, so project risk analysis typically focuses on stand-alone risk.

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Definitions:

Exemptions

Provisions that allow individuals or entities to be relieved from an obligation, such as taxes, previously imposed on them.

Corporate Income Taxes

Taxes imposed on the net income (profits) of corporations by the government.

Property Taxes

Government-imposed charges on property, calculated from the real estate's worth, intended to finance community facilities and public infrastructure.

Payroll Taxes

Payroll Taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff.