Diversified Industries Is a Multi-Product Firm Operating in a Number

question 27

Multiple Choice

Diversified Industries is a multi-product firm operating in a number of industries.Assume the firm is analyzing a new project that has risks unrelated to those of the current firm's product.When computing the net present value of the new project the cash flows should be discounted using:

• A)a rate based on a beta of one since the firm is well diversified.
• B)a rate based on the firm's current beta.
• C)the risk-free rate of return.
• D)the market rate of return.
• E)a rate commensurate with the risk level of the project.

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Definitions:

Historical Purposes

Historical purposes refer to the use of historical data and insights to understand past phenomena or guide future decisions.

Positive Marketing

Marketing strategies aimed at promoting positive messages and social values, often focusing on the benefits to the community or environment.

Tracking Studies

Continuous or repeated surveys that monitor a product's performance, brand health, or customer attitudes over time.

Forecast

A prediction or estimate of future events, especially relating to weather or economics.