Diversified Industries Is a Multiproduct Company Operating in a Number

question 8

Multiple Choice

Diversified Industries is a multiproduct company operating in a number of industries.Assume the company is analyzing a new project that has risks unrelated to those of the current company's products.When computing the net present value of the new project the cash flows should be discounted using

• A)a rate based on a beta of one since the company is well diversified.
• B)a rate based on the company's current beta.
• C)the risk-free rate of return.
• D)the market rate of return.
• E)a rate commensurate with the risk level of the project.

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Definitions:

Adaptive Value

The usefulness of a trait or behavior in helping an organism survive and reproduce within its environment.

Dowry

A transfer of parental property, gifts, or money at the marriage of a daughter, traditionally seen in many societies.

Anthropological Concept

An idea or theory within the discipline of anthropology that seeks to explain aspects of human behavior or culture.

Family

A social unit typically formed by relatives, either through blood, marriage, or adoption, that shares a household and responsibilities.