Question

Evaluating risk is an important part of the capital budgeting process. Which of the following is measured by the variability of the project’s expected returns? a. Corporate, or within-firm, risk b. Stand-alone risk c. Market, or beta, risk

Answer 1

Answer:

(B). Stand-alone risk

Explanation:

Stand-alone risk is the risk resulting from a single isolated project.

The stand-alone risk varies inversely with the project's expected returns.

When expected return of the project is high, the stand-alone risk is low and when the expected return is low, the stand-alone risk is high.