Market risk: Select one: a. views the project from the perspective of a business

Question

Market risk:

Select one:

a. views the project from the perspective of a business's owner who holds a well-diversified portfolio of stocks.

b. assumes the project is held in isolation and ignores portfolio effects within the firm and among its owners (equity investors).

c. views the risk of a project within the context of the firm's portfolio of projects.

d. assesses how changes in a single input variable affect profitability.

Stand-alone risk is never important to assess because not-for-profit businesses should focus on the project's corporate risk and investor-owned firms should focus on a project's market risk.

Select one:

a. True

b. False

Which of the following questions support that of a qualitative risk assessment?

Select one:

a. What is the IRR and NPV of the investment?

b. Is the project outside of the scope of current management expertise?

c. What is the payback period?

d. What is the result of the sensitivity analysis?

When presented with a capital rationing situation, the healthcare leaders should:

a. Choose the investment opportunity that promises the lowest expenses.

b. Choose the investment opportunity with a profitability index (PI) less than 1.00.

c. Simply assess market condition alone.

d. accept the capital project(s) that maximize aggregate NPV and still meet the capital constraint.

The capital budgeting is a perfect, precise decision-making process in the healthcare organization.

a. True

b. False

Explanation / Answer

1. c. views risk of the project within the context of the firm's portfolio of the project.

2.a. true

3.a. what is the IRR and NPV of the investment

4.b. choose the investment oppurtunity with a profitability index(PI) less than 1.00.

5.a. false.

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