If a Project Has a Higher Proportion of Fixed to Variable

question 13

Multiple Choice

If a project has a higher proportion of fixed to variable costs,holding the risk of its revenues constant:

• A)its beta will be lower,hence its cost of capital will be lower.
• B)its beta will be higher,hence its cost of capital will be higher.
• C)its beta will be unaffected,since beta does not measure the sensitivity of the project's cash flows to market risk.
• D)its financial leverage will be higher.

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