Wansley Enterprises Is Considering a New Project

question 20

Multiple Choice

Wansley Enterprises is considering a new project.The company has a beta of 1.0, and its sales and profits are positively correlated with the overall economy.The company estimates that the 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 increase the firm's corporate risk.
• B) The proposed new project would increase the firm's market risk.
• C) The proposed new project would not affect the firm's risk at all.
• D) The proposed new project would have less stand-alone risk than the firm's typical project.
• E) The proposed new project would have more stand-alone risk than the firm's typical project.

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Definitions:

Self-help

The act or practice of trying to improve oneself without the direct aid of others, often through the acquisition of knowledge.

Group Therapy

A form of psychotherapy that involves one or more therapists working with several people at the same time, often used for sharing experiences and supporting each other in treatment processes.

Cognitive-behavioral Therapy

A psychotherapeutic approach that addresses dysfunctional emotions, behaviors, and cognitions through a goal-oriented, systematic procedure.

Somatoform Disorders

A group of psychological disorders in which patients experience physical symptoms that have no identifiable physical cause, often linked to psychological factors.