Table 12.3 Tangshan Mining Company Is Considering Investment in One of Two

question 44

Multiple Choice

Table 12.3
Tangshan Mining Company is considering investment in one of two mutually exclusive projects M and N which are described below. Tangshan Mining's overall cost of capital is 15 percent, the market return is 15 percent and the risk-free rate is 5 percent. Tangshan estimates that the beta for project M is 1.20 and the beta for project N is 1.40.
-Which project, M or N, would be preferable if both projects were of average risk as the overall firm and Tangshan Mining has a beta of 1.0? (See Table 12.3)

• A) Project M.
• B) Project N.
• C) They are equivalent.
• D) none of the above.

---

Definitions:

Bureaucratic Logistical Issues

Challenges in organizing, planning, and carrying out operations often caused by complex administrative procedures.

Market Leaders

Companies that hold the highest market share in a particular industry, often setting trends and standards for others to follow.

Global Market Segments

The division of a worldwide market into distinct subsets of customers with common needs or characteristics, which can be targeted with specific marketing strategies.

Economies of Scale

Benefits in expenses that companies gain because of their operational size, typically seeing a reduction in cost for each unit produced as the size of operations grows.