A Firm Is Considering a New Project Whose Risk Is

question 59

Multiple Choice

A firm is considering a new project whose risk is greater than the risk of the firm's average project, based on all methods for assessing risk.In evaluating this project, it would be reasonable for management to do which of the following?

• A) Increase the estimated NPV of the project to reflect its greater risk.
• B) Reject the project, since its acceptance would increase the firm's risk.
• C) Ignore the risk differential if the project would amount to only a small fraction of the firm's total assets.
• D) Increase the cost of capital used to evaluate the project to reflect its higher-than-average risk.
• E) Increase the estimated IRR of the project to reflect its greater risk.

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Definitions:

Labor Power

The ability of workers to perform work for the purpose of creating goods or services.

Action Value

The inherent or assigned worth of actions, often evaluated based on their outcomes, impacts, or alignment with certain principles or goals.

Corporate Ideologies

A set of beliefs, values, and practices that guides the actions and decisions of a company.

Discourses

Ways of representing the world through language, emphasizing how power, knowledge, and social practices are intertwined.