Cash flows are highly correlated with cash flows

Assignment Help Financial Management

Reference no: EM131618734

Taussig 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: Project X Project Y Expected NPV $350,000 $350,000 Standard deviation (mc048-1.jpgNPV) $100,000 $150,000 Project beta (vs. market) 1.4 0.8 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? Project X has the same market risk as Project Y since its cash flows are not correlated with the cash flows of existing projects. Project X has more corporate (or within-firm) risk than Project Y. Project X has more stand-alone risk than Project Y. Project X has more market risk than Project Y. Project X has the same level of corporate risk as Project Y.

Reference no: EM131618734

Questions Cloud

Estimate the year one cash flow for proposed project : As a member of UA Corporation's financial staff, you must estimate the Year 1 cash flow for a proposed project with the following data. What is the Year 1 cash

Assuming the correlation between the annual returns : Assuming the correlation between the annual returns on the two portfolios is indeed zero, what would be the optimal asset allocation?

Jason repays his loan using the amortization method : Jason repays his loan using the amortization method, at an annual effective interest rate of i. he makes an annual payment of 500 at the end of each year.

Expected dividend payout ratio : Weaver Chocolate Co. expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 65%,

Cash flows are highly correlated with cash flows : Taussig Technologies is considering two potential projects, X and Y. Cash flows are highly correlated with the cash flows from existing projects.

What is the year one cash flow : Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow?

Define strategy formulation : Define ‘strategy’ formulation. Then, list the five forces in Michael Porter’s five forces model.

Chipotle resources-capabilities and competitive advantages : Please identify the Chipotle’s resources, capabilities and competitive advantages.

Calculate the equivalent annual annuity for model : Mike? Mulligan, CEO of Mulligan Excavation? Inc, needs to replace Mary? Anne, his old? steam-driven shovel. Calculate the equivalent annual annuity for Model A.

User Account

All Pages