Bill and Mary own a small chain of high fashion boutiques that represent almost 100% of their net worth.When considering capital budgeting projects for their boutiques,the appropriate measure of risk is

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Quizplus · Accepted Answer

Since Bill and Mary's boutiques represent almost all of their net worth, the most appropriate measure of risk would be contribution-to-firm risk. This measures how much the investment contributes to the overall risk of the firm, which is important for a small business that relies heavily on its boutiques. Systematic risk and beta risk are measures of how the investment's returns are affected by market factors, and project standing alone risk is not as applicable in this situation since the boutiques are such a large part of their net worth.

Bill and Mary Own a Small Chain of High Fashion