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Author Question: Suppose a firm is a publicly owned corporation and is seeking to maximize shareholder wealth. Which ... (Read 67 times)

camac77

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on: Aug 7, 2023
Suppose a firm is a publicly owned corporation and is seeking to maximize shareholder wealth. Which of the following statements is correct?

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Project A has a standard deviation of expected returns of 30%, while Project B’s standard deviation is only 15%. A’s returns are negatively correlated with both the firm’s other assets and the returns on most stocks in the economy, while B’s returns are positively correlated. Therefore, Project A is less risky to a firm and should be evaluated with a lower cost of capital.


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Projects with below-average risk typically have lower than average expected returns. Therefore, to maximize a firm’s shareholder wealth, its managers should choose high-beta projects over those with lower betas.


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If a firm evaluates all projects using the same cost of capital, and the CAPM is used to help determine that cost, then its risk as measured by beta will probably decline over time.


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If a firm has a beta that is less than 1.0, say 0.7, this would suggest that the expected returns on its assets are negatively correlated with the returns on most other firms’ assets.

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by camac77 on Aug 7, 2023

risolinick@gmail.com

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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camac77

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Reply 2 on: Aug 7, 2023
Thanks for the timely response, appreciate it

pratush dev

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Reply 3 on: Yesterday
Excellent

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