Markley and Stearns Is a Multi-Divisional Firm That Uses Its

question 46

Multiple Choice

Markley and Stearns is a multi-divisional firm that uses its WACC as the discount rate for all proposed projects.Each division is in a separate line of business and each presents risks unique to those lines.Given this,a division within the firm will tend to:

• A)receive less project funding if its line of business is riskier than that of the other divisions.
• B)avoid risky projects so it can receive more project funding.
• C)become less risky over time based on the projects that are accepted.
• D)have equal probability of receiving funding as compared to the other divisions.
• E)prefer higher risk projects over lower risk projects.

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Definitions:

Unknown Mean

A statistical term referring to the average value of a population or dataset that has not been determined.

Variance

A measure of the dispersion of a set of data points around their mean value.

Final Exam Scores

The grades obtained by students at the end of a course, which often culminate their learning and understanding of the subject material.

Normal Distribution

A probability distribution resembling a bell curve, symmetric around the average, indicating that occurrences close to the mean are more common than those further away.