If a project has a higher proportion of fixed to variable costs, holding the risk of its revenues constant: O a. its financial leverage will be higher. O b. its beta will be lower, hence its cost of capital will be lower. O c. its beta will be higher, hence its cost of capital will be higher. O d. its beta will be unaffected, since beta does not measure the sensitivity of the project's cash flows to market risk.
If a project has a higher proportion of fixed to variable costs, holding the risk of its revenues constant: O a. its financial leverage will be higher. O b. its beta will be lower, hence its cost of capital will be lower. O c. its beta will be higher, hence its cost of capital will be higher. O d. its beta will be unaffected, since beta does not measure the sensitivity of the project's cash flows to market risk.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter12: Capital Investment Decisions
Section: Chapter Questions
Problem 16MCQ: Using IRR, a project is rejected if the IRR a. is equal to the required rate of return. b. is less...
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