Which of the Following Statements Is Correct

question 134

Multiple Choice

Which of the following statements is correct?

• A) Neither "stand-alone" nor "within-firm" risk takes account of diversification,either by stockholders or by the firm.
• B) If a project's expected returns are highly correlated with returns on the market,this will tend to reduce the project's market risk.
• C) Monte Carlo simulation analysis and sensitivity analysis are similar,but sensitivity analysis is generally harder to use because it requires knowledge of the probability distributions associated with the input variables.
• D) Sensitivity analysis requires a project's beta coefficient,which can be obtained by either the "pure play" or the "accounting beta" method.
• E) If we are choosing between two mutually exclusive projects which have only costs (no revenues),the riskier one should be evaluated with a lower required rate of return.

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Definitions:

Sole Proprietorships

A business structure where a single individual owns and operates the business, enjoying complete control but also bearing unlimited personal liability for its debts.

Regulatory Requirements

Legal obligations that entities must follow, often established by government agencies to regulate industry standards and protect public welfare.

Agent's Authority

The scope of power given to an agent to act on behalf of a principal in legal or financial matters.

Termination

The act of ending or concluding something, such as a contract, employment, or agreement, through specific actions or by operation of law.