In Order to Value a Project Which Is Not Scale

question 24

Multiple Choice

In order to value a project which is not scale enhancing you need to:

• A)typically calculate the equity cost of capital using the risk adjusted beta of another firm in
• The industry before calculating the WACC.
• B)typically increase the beta of another firm in the same line of business and then calculate
• The discount rate using the SML.
• C)typically you can simply apply your current cost of capital.
• D)discount at the market rate of return since the project will diversify the firm to the market.
• E)typically calculate the equity cost of capital using the risk adjusted beta of another firm in
• Another industry before calculating the WACC.

---

Definitions:

Customer-oriented

An approach or strategy that focuses primarily on meeting the needs and expectations of customers.

Retailer-sponsored Cooperatives

Organizations owned and operated by a group of retailers aimed at improving purchasing power and marketing capabilities through collective efforts.

Franchising

A business model that allows an individual or group to operate a business using the branding and business structure of an established company.

Contractual Vertical Marketing System

A system in which independent firms at different levels of the distribution chain work together through contractual agreements to achieve greater economies of scale and reach a greater market effectiveness than they could achieve alone.