Tallant Technologies Is Considering Two Potential Projects, X and Y

question 44

Multiple Choice

Tallant Technologies is considering two potential projects, X and Y.In assessing the projects' risks, the company estimated the beta of each project versus both the company's other assets and the stock market, and it also conducted thorough scenario and simulation analyses.This research produced the following data:

Correlation of the project cash flows with cash flows from currently existing projects.Cash flows are not correlated with the cash flows from existing projects.Cash flows are highly correlated with the cash flows from existing projects.
Which of the following statements is CORRECT?

• A) Project X has more corporate (or within-firm)risk than Project Y.
• B) Project X has more market risk than Project Y.
• C) Project X has the same level of corporate risk as Project Y.
• D) Project X has less market risk than Project Y.
• E) Project X has more stand-alone risk than Project Y.

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Definitions:

Strike-Slip Fault

A type of fault where two blocks of the Earth's crust slide past one another in a horizontal direction, with little to no vertical movement.

Horizontal Offset

The displacement of the Earth's surface along a fault line, measured in a horizontal direction.

Fault Scarp

A steep slope or cliff formed as a result of movement along a geological fault, typically found at the Earth's surface.

Carbon-14

A carbon isotope that emits radiation, utilized in radiocarbon dating to ascertain the age of organic matter.