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In Order to Value a Project Which Is Not Scale

Question 23

Multiple Choice

In order to value a project which is not scale enhancing you typically need to:


A) calculate the equity cost of capital using the risk-adjusted beta of another firm.
B) double the firm's beta value when computing the project WACC.
C) apply the firm's current WACC to the project's cash flows.
D) discount the project's cash flows using the market rate of return since the project will diversify the firm's operations.
E) replace the risk-free rate with the market rate of return when computing the project's discount rate.

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