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

question 5

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 (σp/σf)rpf, where σp is the standard deviation of the project's returns, σf is the standard deviation of the firm's returns, and rpf 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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Definitions:

Intellectualize

To intellectualize is to approach or analyze a situation or emotion in an overly rational manner, often as a defense mechanism to avoid confronting the underlying emotional aspects.

Rationalize

The process of attempting to logically justify behavior or attitudes that might otherwise be unacceptable or irrational.

Paraphrase

The act of rewording or rephrasing a text or statement to achieve clearer understanding without changing its original meaning.

Direction

Guidance or instructions on how to perform a task or reach a destination; also refers to the course along which someone or something moves.