Consider the case of another company. Kim Printing is evaluating two mutually exclusive projects. They both require a $3 million investment today and have expected NPVs of $600,000. Management...




Consider the case of another company. Kim Printing is evaluating two mutually exclusive projects. They both require a $3 million investment today and have expected NPVs of $600,000. Management conducted a full risk analysis of these two projects, and the results are shown below.




























Risk Measure


Project A


Project B

Standard deviation of project’s expected NPVs$240,000$360,000
Project beta0.90.7
Correlation coefficient of project cash flows (relative to the firm’s existing projects)0.60.8






Which of the following statements about these projects’ risk is correct? Check all that apply.




Project B has more market risk than Project A.






Project A has more market risk than Project B.






Project A has more stand-alone risk than Project B.






Project B has more stand-alone risk than Project A.







Jun 09, 2022
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