In Order to Value a Project Which Is Not Scale

question 35

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:

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