QUESTION 34 ed Hill 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 ssets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data: Expected NPV Standard deviation (ONPV) Project beta (vs. market) Correlation of the project cash lows with cash flows from urrently existing projects Project X $350,000 $100,000 1.4 Cash flows are not correlated with the cash flows from existing projects Which of the following statements is CORRECT? Project Y $350,000 $150,000 0.8 Cash flows are highly correlated with the cash flows from existing projects
QUESTION 34 ed Hill 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 ssets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data: Expected NPV Standard deviation (ONPV) Project beta (vs. market) Correlation of the project cash lows with cash flows from urrently existing projects Project X $350,000 $100,000 1.4 Cash flows are not correlated with the cash flows from existing projects Which of the following statements is CORRECT? Project Y $350,000 $150,000 0.8 Cash flows are highly correlated with the cash flows from existing projects
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter3: Data Visualization
Section: Chapter Questions
Problem 18P: The Ajax Company uses a portfolio approach to manage their research and development (RD) projects....
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Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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