Wansley Enterprises Is Considering a New Project

question 20

Multiple Choice

Wansley Enterprises is considering a new project.The company has a beta of 1.0, and its sales and profits are positively correlated with the overall economy.The company estimates that the proposed new project would have a higher standard deviation and coefficient of variation than an average company project.Also, the new project's sales would be countercyclical in the sense that they would be high when the overall economy is down and low when the overall economy is strong.On the basis of this information, which of the following statements is CORRECT?

• A) The proposed new project would increase the firm's corporate risk.
• B) The proposed new project would increase the firm's market risk.
• C) The proposed new project would not affect the firm's risk at all.
• D) The proposed new project would have less stand-alone risk than the firm's typical project.
• E) The proposed new project would have more stand-alone risk than the firm's typical project.

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Definitions:

Narcolepsy

A sleep disorder characterized by excessive daytime sleepiness and sudden attacks of sleep.

Insomnia

A sleep disorder characterized by difficulty in falling asleep, staying asleep, or obtaining restorative sleep.

Night Terrors

A sleep disorder causing feelings of panic or dread typically occurring in the early night and often accompanied by screaming, flailing, and intense fear, without the individual fully waking.

Complex Concept

An idea, theory, or principle that is composed of various interconnected parts, making it difficult to comprehend entirely without thorough analysis.