Which of the Following Statements About Project Risk Analysis in Not-For-Profit

question 2

Multiple Choice

Which of the following statements about project risk analysis in not-for-profit firms is incorrect?

• A) A project's corporate beta measures the contribution of the project to the overall corporate risk of the firm.
• B) A project's corporate beta is found (at least conceptually) by regressing returns on the project against returns on the market portfolio.
• C) A project's corporate beta is defined as (σ_P/σ_F)r_PF, where σ_P is the standard deviation of the project's returns, σ_F is the standard deviation of the firm's returns, and r_PF is the correlation among the two sets of returns.
• D) In practice, it is usually difficult, if not impossible, to directly measure a project's corporate risk, so project risk analysis typically focuses on stand-alone risk.
• E) The market risk of a project is not relevant to not-for-profit firms.

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