If a capital budgeting project has a higher corporate risk than the average risk contained in the firm's portfolio of assets, it generally has a:
A)lower political risk.
B)greater beta risk.
C)lower project risk.
D)lower exchange rate risk.
E)greater financial risk.

Question

Quizplus · Accepted Answer

If a capital budgeting project has a higher corporate risk than the average risk contained in the firm's portfolio of assets, it generally has a greater beta risk. Beta represents the sensitivity of an asset's return to the market return. A higher beta indicates higher volatility and, thus, higher risk.

If a Capital Budgeting Project Has a Higher Corporate Risk