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:

U.S. Dollars

The currency of the United States, widely used as a benchmark and reserve currency around the world.

Currency Market

Also known as the foreign exchange market, it's a global decentralized market for the trading of currencies.

Supply of British Pounds

The total amount of British pounds (GBP) available for transactions and investment in the currency markets.

Appreciation

An increase in the value of an asset, currency, or other financial instrument over time.