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.

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Definitions:

Part

A piece or component of a larger object or system.

Undercut

Undercut is a condition in manufacturing where a part of the geometry is recessed below or behind an adjacent surface, often challenging to machine.

Symbol

A symbol is a graphical representation or sign that stands for an object, concept, or operation in technical drawings, schematics, or mathematical equations, facilitating communication.

Symmetry

A balanced and proportionate similarity between two halves of an object, often mirrored around a central axis.