A Firm Is Considering a New Project Whose Risk Is

question 69

Multiple Choice

A firm is considering a new project whose risk is greater than the risk of the firm's average project, based on all methods for assessing risk.In evaluating this project, it would be reasonable for management to do which of the following?

• A) Increase the estimated NPV of the project to reflect its greater risk.
• B) Reject the project, since its acceptance would increase the firm's risk.
• C) Ignore the risk differential if the project would amount to only a small fraction of the firm's total assets.
• D) Increase the cost of capital used to evaluate the project to reflect its higher-than-average risk.
• E) Increase the estimated IRR of the project to reflect its greater risk.

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Definitions:

Constant Tension

A state wherein a muscle remains in a consistently contracted state, maintaining a steady force output without relaxation.

Creatine Phosphate

A compound stored in muscle cells that releases energy to aid in the formation of ATP, serving as an energy reserve for muscle contraction.

Synthesized

Produced by combining different elements, substances, or parts, often in a complex process.

Resting Conditions

The state or condition of an organism or cell when it is not being stimulated or actively engaging in metabolic activities.