In Order to Value a Project Which Is Not Scale

question 35

Multiple Choice

In order to value a project which is not scale enhancing you need to:

• A) typically calculate the equity cost of capital using the risk adjusted beta of another firm in the industry before calculating the WACC.
• B) typically increase the beta of another firm in the same line of business and then calculate the discount rate using the SML.
• C) typically you can simply apply your current cost of capital.
• D) discount at the market rate of return since the project will diversify the firm to the market.
• E) typically calculate the equity cost of capital using the risk adjusted beta of another firm in another industry before calculating the WACC.

---

Definitions:

Main Effect

In statistics, the direct influence of an independent variable on a dependent variable in an experimental design.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome.

Motivation Levels

The intensity of one's drive or desire to undertake specific behaviors or pursue particular outcomes.

Factorial Design

An experimental setup that involves two or more factors with different levels to study their effects on the dependent variable.