Which of the Following Statements Is Correct

question 164

Multiple Choice

Which of the following statements is correct?

• A) Sensitivity analysis is used frequently in capital budgeting analysis.Its big advantage is that because it shows correlations between changes in input variables and NPV,it accounts for within-firm risk.
• B) Other things held constant,the lower the correlation between a project's returns and returns on the market,the less risky the project.
• C) In judging the relative stand-alone risks of a set of projects,the projects' standard deviations of NPV are a better measure than their coefficients of variation.
• D) One can run a regression of returns on a project versus returns on the firm's other assets,get a beta coefficient,and use this beta as a measure of the project's market risk.
• E) One can run a regression of returns on a project versus returns on the stock market,get a beta coefficient,and use this beta as a measure of the project's within-firm risk.

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Definitions:

Degree of Development

A measure of a country's economic, social, and technological progress.

Collective Behavior

The actions, thoughts, and feelings of a relatively temporary and unstructured group of people.

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Shared expectations and rules that guide behavior within a group or society.

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The system that outlines how certain activities are directed in order to achieve the goals of an organization, including the rules, roles, and responsibilities.