For a Multi-Product Firm,if a Project's Beta Is Different from That

question 52

Multiple Choice

For a multi-product firm,if a project's beta is different from that of the overall firm,then the:

• A) CAPM can no longer be used.
• B) project should be discounted using the overall firm's beta.
• C) project should be discounted at a rate commensurate with its own beta.
• D) project should be discounted at the market rate.
• E) project should be discounted at the T-bill ratE.

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Definitions:

Participative Budgeting

A budgeting process where both management and employees participate in setting budgets, improving accuracy and commitment.

Budgeting Slack

The practice of underestimating revenue or overestimating expenses while preparing a budget to create a cushion or slack for unexpected situations.

Budgetary Slack

The practice of underestimating revenues or overestimating expenses when preparing a budget to create a buffer for unexpected scenarios.

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe existing state or future outcomes, often affecting decision-making processes.