Markley and Stearns Is a Multi-Divisional Firm That Uses Its

question 46

Multiple Choice

Markley and Stearns is a multi-divisional firm that uses its WACC as the discount rate for all proposed projects.Each division is in a separate line of business and each presents risks unique to those lines.Given this,a division within the firm will tend to:

• A)receive less project funding if its line of business is riskier than that of the other divisions.
• B)avoid risky projects so it can receive more project funding.
• C)become less risky over time based on the projects that are accepted.
• D)have equal probability of receiving funding as compared to the other divisions.
• E)prefer higher risk projects over lower risk projects.

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Definitions:

Stereochemistry

A branch of chemistry focused on the study of the spatial arrangements of atoms in molecules and their effects on chemical reactions.

Organic Product

A compound or material derived from living organisms or produced by reactions involving organic compounds.

Major

Referring to the most prevalent or significant component, outcome, or factor in a given context, often contrasted with "minor."

Secondary Alcohol

An organic compound where the hydroxyl (—OH) group is bonded to a carbon atom that is attached to exactly two other carbon atoms.