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.

Question

Quizplus · Accepted Answer

The Answer of 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.

Which of the Following Statements Is Correct