Strategic Financial Management
Final Test Solutions
Course Introduction
Strategic Financial Management explores the integration of financial management techniques with strategic planning to achieve long-term organizational objectives. The course covers topics such as financial analysis, capital budgeting, risk management, value creation, and funding strategies, emphasizing their role in shaping competitive advantage. Students learn to evaluate financial decisions within the broader context of business strategy, employ advanced tools for investment and financing decisions, and understand how financial policies impact firm value. The course prepares students to analyze complex financial environments and develop strategies that align financial resources with organizational goals.
Recommended Textbook
Financial Management Theory and Practice 14th Edition by Eugene F. Brigham
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Page 2
Chapter 1: An Overview of Financial Management and the Financial Environment
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Sample Questions
Q1) You recently sold 100 shares of your new company,XYZ Corporation,to your brother at a family reunion.At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates.Which of the following statements best describes this transaction?
A) This is an example of an exchange of physical assets.
B) This is an example of a primary market transaction.
C) This is an example of a direct transfer of capital.
D) This is an example of a money market transaction.
E) This is an example of a derivatives market transaction
Answer: C
Q2) If Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other firms or individuals,Firm A is a financial intermediary. A)True
B)False Answer: True
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Page 3
Chapter 2: Financial Statements, cash Flow, and Taxes
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Q1) Assume that Congress recently passed a provision that will enable Barton's Rare Books (BRB)to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or tax rate.Prior to the new provision,BRB's net income after taxes was forecasted to be $4 million.Which of the following best describes the impact of the new provision on BRB's financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.
A) Net fixed assets on the balance sheet will decrease.
B) The provision will reduce the company's net cash flow.
C) The provision will increase the company's tax payments.
D) Net fixed assets on the balance sheet will increase.
E) The provision will increase the company's net income.
Answer: A
Q2) Total net operating capital is equal to net fixed assets.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Analysis of Financial Statements
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Sample Questions
Q1) Which of the following statements is CORRECT?
A) If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will decrease.
B) A reduction in inventories held would have no effect on the current ratio.
C) An increase in inventories would have no effect on the current ratio.
D) If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
E) A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.
Answer: D
Q2) Suppose a firm wants to maintain a specific TIE ratio.It knows the amount of its debt,the interest rate on that debt,the applicable tax rate,and its operating costs.With this information,the firm can calculate the amount of sales required to achieve its target TIE ratio.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Time Value of Money
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Sample Questions
Q1) A U.S.Treasury bond will pay a lump sum of $1,000 exactly 3 years from today.The nominal interest rate is 6%,semiannual compounding.Which of the following statements is CORRECT?
A) The PV of the $1,000 lump sum has a smaller present value than the PV of a 3-year, $333.33 ordinary annuity.
B) The periodic interest rate is greater than 3%.
C) The periodic rate is less than 3%.
D) The present value would be greater if the lump sum were discounted back for more periods.
E) The present value of the $1,000 would be larger if interest were compounded monthly rather than semiannually.
Q2) Suppose Randy Jones plans to invest $1,000.He can earn an effective annual rate of 5% on Security A,while Security B has an effective annual rate of 12%.After 11 years,the compounded value of Security B should be somewhat less than twice the compounded value of Security A.(Ignore risk,and assume that compounding occurs annually.)
A)True
B)False
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Page 6
Chapter 5: Bonds, bond Valuation, and Interest Rates
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Sample Questions
Q1) A call provision gives bondholders the right to demand,or "call for," repayment of a bond.Typically,calls are exercised if interest rates rise,because when rates rise the bondholder can get the principal amount back and reinvest it elsewhere at higher rates. A)True B)False
Q2) Which of the following statements is CORRECT?
A) On an expected yield basis, the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss.
B) On an expected yield basis, the expected current yield will always be positive because an investor would not purchase a bond that is not expected to pay any cash coupon interest.
C) If a coupon bond is selling at par, its current yield equals its yield to maturity.
D) The current yield on Bond A exceeds the current yield on Bond B; therefore, Bond A must have a higher yield to maturity than Bond B.
E) If a bond is selling at a discount, the yield to call is a better measure of return than the yield to maturity.
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Chapter 6: Risk and Return
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Sample Questions
Q1) One key conclusion of the Capital Asset Pricing Model is that the value of an asset should be measured by considering both the risk and the expected return of the asset,assuming that the asset is held in a well-diversified portfolio.The risk of the asset held in isolation is not relevant under the CAPM.
A)True
B)False
Q2) If a stock's market price exceeds its intrinsic value as seen by the marginal investor,then the investor will sell the stock until its price has fallen down to the level of the investor's estimate of the intrinsic value.
A)True
B)False
Q3) An individual stock's diversifiable risk,which is measured by its beta,can be lowered by adding more stocks to the portfolio in which the stock is held.
A)True
B)False
Q4) A stock with a beta equal to -1.0 has zero systematic (or market)risk.
A)True
B)False
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Page 8
Chapter 7: Valuation of Stocks and Corporations
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Sample Questions
Q1) If D<sub>1</sub> = $1.25,g (which is constant)= 5.5%,and P<sub>0</sub> = $44,what is the stock's expected total return for the coming year?
A) 7.54%
B) 7.73%
C) 7.93%
D) 8.13%
E) 8.34%
Q2) The total return on a share of stock refers to the dividend yield less any commissions paid when the stock is purchased and sold.
A)True
B)False
Q3) Preferred stock is a hybrid-a sort of cross between a common stock and a bond-in the sense that it pays dividends that normally increase annually like a stock but its payments are contractually guaranteed like interest on a bond. A)True
B)False
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9
Chapter 8: Financial Options and Applications in Corporate Finance
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Sample Questions
Q1) As the price of a stock rises above the strike price,the value investors are willing to pay for a call option increases because both (1)the immediate capital gain that can be realized by exercising the option and (2)the likely exercise value of the option when it expires have both increased.
A)True
B)False
Q2) The current price of a stock is $22,and at the end of one year its price will be either $27 or $17.The annual risk-free rate is 6.0%,based on daily compounding.A 1-year call option on the stock,with an exercise price of $22,is available.Based on the binomial model,what is the option's value? (Hint: Use daily compounding.)
A) $2.43
B) $2.70
C) $2.99
D) $3.29
E) $3.62
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Chapter 9: The Cost of Capital
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Sample Questions
Q1) To estimate the company's WACC,Marshall Inc.recently hired you as a consultant.You have obtained the following information.(1)The firm's noncallable bonds mature in 20 years,have an 8.00% annual coupon,a par value of $1,000,and a market price of $1,050.00.(2)The company's tax rate is 40%.(3)The risk-free rate is 4.50%,the market risk premium is 5.50%,and the stock's beta is 1.20.(4)The target capital structure consists of 35% debt and the balance is common equity.The firm uses the CAPM to estimate the cost of common stock,and it does not expect to issue any new shares.What is its WACC?
A) 7.16%
B) 7.54%
C) 7.93%
D) 8.35%
E) 8.79%
Q2) The before-tax cost of debt,which is lower than the after-tax cost,is used as the component cost of debt for purposes of developing the firm's WACC.
A)True
B)False
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Chapter 10: The Basics of Capital Budgeting: Evaluating Cash Flows
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Sample Questions
Q1) Spence Company is considering a project that has the following cash flow data.What is the project's IRR? Note that a project's IRR can be less than the WACC or negative,in both cases it will be rejected. \(\begin{array}{lcccc} \text { Year } & 0 & 1 & 2 & 3&4 \\ \hline\text { Cash flows } & -\$ 1.050 & \$ 400 & \$ 400 & \$ 400& \$ 400 \end{array}\)
A) 14.05%
B) 15.61%
C) 17.34%
D) 19.27%
E) 21.20%
Q2) A basic rule in capital budgeting is that if a project's NPV exceeds its IRR,then the project should be accepted.
A)True B)False
Q3) A firm should never accept a project if its acceptance would lead to an increase in the firm's cost of capital (its WACC).
A)True B)False
Page 12
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Chapter 11: Cash Flow Estimation and Risk Analysis
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Sample Questions
Q1) The coefficient of variation,calculated as the standard deviation of expected returns divided by the expected return,is a standardized measure of the risk per unit of expected return.
A)True
B)False
Q2) The two cardinal rules that financial analysts should follow to avoid capital budgeting errors are: (1)in the NPV equation,the numerator should use income calculated in accordance with generally accepted accounting principles,and (2)all incremental cash flows should be considered when making accept/reject decisions.
A)True
B)False
Q3) Although it is extremely difficult to make accurate forecasts of the revenues that a project will generate,projects' initial outlays and subsequent costs can be forecasted with great accuracy.This is especially true for large product development projects.
A)True
B)False
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13
Chapter 12: Corporate Valuation and Financial Planning
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Q1) Which of the following statements is CORRECT?
A) The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales.
B) Forecasted financial statements, as discussed in the text, are used primarily as a part of the managerial compensation program, where management's historical performance is evaluated.
C) The capital intensity ratio gives us an idea of the physical condition of the firm's fixed assets.
D) The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists.
E) Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings.
Q2) A firm will use spontaneous funds to the extent possible; however,due to credit terms,contracts with workers,and tax laws there is little flexibility in their usage.
A)True B)False
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Chapter 13: Agency Conflicts and Corporate Governance
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Sample Questions
Q1) ESOPs were originally designed to help improve worker productivity,but today they are also used to help prevent hostile takeovers.
A)True
B)False
Q2) The CEO of D'Amico Motors has been granted some stock options that have provisions similar to most other executive stock options.If D'Amico's stock underperforms the market,these options will necessarily be worthless.
A)True
B)False
Q3) Which of the following is NOT normally regarded as being a barrier to hostile takeovers?
A) Targeted share repurchases.
B) Shareholder rights provisions.
C) Restricted voting rights.
D) Poison pills.
E) Abnormally high executive compensation.
Q4) A poison pill is also known as a corporate restructuring.
A)True
B)False
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Chapter 14: Distributions to Shareholders: Dividends and Repurchases
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Sample Questions
Q1) Which of the following statements is correct?
A) If a company has an established clientele of investors who prefer a high dividend payout, and if management wants to keep stockholders happy, it should not follow the strict residual dividend policy.
B) If a firm follows a strict residual dividend policy, then, holding all else constant, its dividend payout ratio will tend to rise whenever the firm's investment opportunities improve.
C) If Congress eliminates taxes on capital gains but leaves the personal tax rate on dividends unchanged, this would motivate companies to increase their dividend payout ratios.
D) Despite its drawbacks, following the residual dividend policy will tend to stabilize actual cash dividends, and this will make it easier for firms to attract a clientele that prefers high dividends, such as retirees.
E) One advantage of dividend reinvestment plans is that they enable investors to avoid paying taxes on the dividends they receive.
Q2) A reverse split reduces the number of shares outstanding.
A)True
B)False
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Chapter 15: Capital Structure Decisions
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Q1) Different borrowers have different risks of bankruptcy,and bankruptcy is costly to lenders.Therefore,lenders charge higher rates to borrowers judged to be more at risk of going bankrupt.
A)True
B)False
Q2) The trade-off theory states that the capital structure decision involves a tradeoff between the costs and benefits of debt financing.
A)True
B)False
Q3) It is possible that two firms could have identical financial and operating leverage,yet have different degrees of risk as measured by the variability of EPS.
A)True
B)False
Q4) A firm's capital structure does not affect its calculated free cash flows,because FCF reflects only operating cash flows.
A)True
B)False
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Chapter 16: Supply Chains and Working Capital Management
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Q1) The company you just started has been offered credit terms of 4/30,net 90 days.What will be the nominal annual percentage cost of its non-free trade credit if it pays 120 days after the purchase? (Assume a 365-day year.)
A) 16.05%
B) 16.90%
C) 17.74%
D) 18.63%
E) 19.56%
Q2) When deciding whether or not to take a trade discount,the cost of borrowing from a bank or other source should be compared to the cost of trade credit to determine if the cash discount should be taken.
A)True
B)False
Q3) The aging schedule is a commonly used method for monitoring receivables. A)True B)False
Q4) Net working capital is defined as current assets divided by current liabilities. A)True
B)False
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Chapter 17: Multinational Financial Management
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Q1) The Eurodollar market is essentially a long-term market; most loans and deposits in this market have maturities longer than one year.
A)True
B)False
Q2) Suppose the exchange rate between U.S.dollars and Swiss francs is SF 1.41 = $1.00,and the exchange rate between the U.S.dollar and the euro is $1.00 = 1.64
euros.What is the cross-rate of Swiss francs to euros?
A) 0.43
B) 0.86
C) 1.41
D) 1.64
E) 2.27
Q3) When the value of the U.S.dollar appreciates against another country's currency,we may purchase more of the foreign currency with a dollar.
A)True
B)False
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Q1) If its managers make a tender offer and buy all shares that were not held by the management team,this is called a private placement.
A)True
B)False
Q2) Which of the following factors would increase the likelihood that a company would call its outstanding bonds at this time?
A) A provision in the bond indenture lowers the call price on specific dates, and yesterday was one of those dates.
B) The flotation costs associated with issuing new bonds rise.
C) The firm's CFO believes that interest rates are likely to decline in the future.
D) The firm's CFO believes that corporate tax rates are likely to be increased in the future.
E) The yield to maturity on the company's outstanding bonds increases due to a weakening of the firm's financial situation.
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20
Chapter 18: Extension 18 A: Rights Offerings
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Q1) There are 10,000,000 shares outstanding of O'Connell Co.'s stock,which now sells for $50 per share.The company plans to raise $100 million as new equity by selling common stock.Since the preemptive right is in the corporate charter,rights will be used.Management has decided that the rights should be worth $1 each: Such a price would assure that most stockholders would either exercise or sell their rights rather than just letting them expire,yet a careless failure to use the rights would not impose too severe a hardship on anyone.What subscription price should O'Connell set for its offering to obtain the desired price of the rights,and what will be the ex-rights stock price (M<sub>e</sub>),assuming the theoretical relationships hold? (Hint: N = Number of old shares/Number of new shares; Number of new shares = Dollars to be raised/Subscription price per share.)
\(\begin{array}{lll}
& \text { Sub Price } & \text { Ex-rights } \\
\text { a. } & \$ 39.65 & \$ 42.50 \\
\text { b. } & \$ 40.25 & \$ 43.50 \\
\text { c. } & \$ 42.65 & \$ 47.50 \\
\text { d. } & \$ 44.55 & \$ 49.00 \\
\text { e. } & \$ 46.65 & \$ 50.00 \end{array}\)
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Chapter 19: Lease Financing
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Q1) A lease versus purchase analysis should compare the cost of leasing to the cost of owning,assuming that the asset purchased
A) is financed with long-term debt.
B) is financed with debt whose maturity matches the term of the lease.
C) is financed with a mix of debt and equity based on the firm's target capital structure, i.e., at the WACC.
D) is financed with retained earnings.
E) is financed with short-term debt.
Q2) Heavy use of off-balance sheet lease financing will tend to
A) make a company appear less risky than it actually is because its stated debt ratio will appear lower.
B) affect a company's cash flows but not its degree of risk.
C) have no effect on either cash flows or risk because the cash flows are already reflected in the income statement.
D) affect the lessee's cash flows but only due to tax effects.
E) make a company appear more risky than it actually is because its stated debt ratio will be increased.
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Page 22
Chapter 20: Hybrid Financing: Preferred Stock, warrants, and Convertibles
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Q1) A convertible debenture can never sell for more than its conversion value or less than its bond value.
A)True
B)False
Q2) The problem of dilution of stockholders' earnings never results from the sale of call options,but it can arise if warrants are used.
A)True
B)False
Q3) Preferred stock can provide a financing alternative for some firms when market conditions are such that they cannot issue either pure debt or common stock at any reasonable cost.
A)True
B)False
Q4) Preferred stock typically has a par value,and the dividend is often stated as a percentage of par.The par value is also important in the event of liquidation,as the preferred stockholders are generally entitled to receive the par value before anything is given to the common stockholders.
A)True
B)False
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Chapter 21: Dynamic Capital Structures
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Q1) A local firm has debt worth $200,000,with a yield of 9%,and equity worth $300,000.It is growing at a 5% rate,and its tax rate is 40%.A similar firm with no debt has a cost of equity of 12%.Under the MM extension with growth,what is the value of your firm's tax shield,i.e.,how much value does the use of debt add?
A) $92,571
B) $102,857
C) $113,143
D) $124,457
E) $136,903
Q2) Other things held constant,an increase in financial leverage will increase a firm's market (or systematic)risk as measured by its beta coefficient.
A)True
B)False
Q3) When a firm has risky debt,its debt can be viewed as an option on the total value of the firm with an exercise price equal to the face value of the equity.
A)True
B)False
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Chapter 22: Mergers and Corporate Control
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Q1) Coca-Cola's acquisition of Columbia Pictures and its announcement that it would operate its new subsidiary separately could be described as primarily a financial merger.
A)True
B)False
Q2) A joint venture is one in which two,or sometimes more,independent companies agree to combine resources in order to achieve a specific objective,usually limited in scope.
A)True
B)False
Q3) A congeneric merger is one where the merging firms operate in related businesses but do not necessarily produce the same products or have a producer-supplier relationship.
A)True
B)False
Q4) Although goodwill created in a merger may not be amortized for shareholder reporting purposes,it may be amortized for Federal tax purposes.
A)True B)False
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Chapter 23: Enterprise Risk Management
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Q1) Which of the following statements about interest rate and reinvestment rate risk is CORRECT?
A) Interest rate price risk exists because fixed-rate debt securities lose value when interest rates rise, while reinvestment rate risk is the risk of earning less than expected when interest payments or debt principal are reinvested.
B) Interest rate price risk can be eliminated by holding zero coupon bonds.
C) Reinvestment rate risk can be eliminated by holding variable (or floating) rate bonds.
D) Interest rate risk can never be reduced.
E) Variable (or floating) rate securities have more interest rate (price) risk than fixed rate securities.
Q2) Suppose the September CBOT Treasury bond futures contract has a quoted price of 89'09.What is the implied annual interest rate inherent in this futures contract?
A) 6.32%
B) 6.65%
C) 7.00%
D) 7.35%
E) 7.72%
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Chapter 24: Bankruptcy, reorganization, and Liquidation
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Q1) Even if a firm's cash flow projections indicate that it will soon be unable to meet its interest payments,a bankruptcy case cannot begin until the firm actually defaults on a scheduled payment.
A)True
B)False
Q2) One of the actions that can be taken in bankruptcy under the standard of feasibility is to replace existing management with a new team if the quality of management is judged to have been substandard.
A)True
B)False
Q3) The primary test of feasibility in a reorganization is whether the firm's fixed charges after reorganization can be covered by its projected cash flows.
A)True
B)False
Q4) Bankruptcy plays no role in settling labor disputes and product liability suits.Such issues are outside the bounds of bankruptcy law and are covered by other statutes.
A)True
B)False
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Chapter 25: Portfolio Theory and Asset Pricing Models
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Q1) The Y-axis intercept of the SML indicates the return on an individual asset when the realized return on an average (b = 1)stock is zero.
A)True
B)False
Q2) Security A has an expected return of 12.4% with a standard deviation of 15%,and a correlation with the market of 0.85.Security B has an expected return of -0.73% with a standard deviation of 20%,and a correlation with the market of -0.67.The standard deviation of r<sub>M</sub> is 12%.
A) To someone who acts in accordance with the CAPM, which security is more risky, A or B? Why? (Hint: No calculations are necessary to answer this question; it is easy.)
B) What are the beta coefficients of A and B? Calculations are necessary.
C) If the risk-free rate is 6%, what is the value of r<sub>M</sub>?
Q3) The CAPM is a multi-period model which takes account of differences in securities' maturities,and it can be used to determine the required rate of return for any given level of systematic risk.
A)True
B)False
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28
Chapter 26: Real Options
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Q1) Which one of the following is an example of a "flexibility" option?
A) A company has an option to close down an operation if it turns out to be unprofitable.
B) A company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or outputs at a later date if conditions change.
C) A company invests in a project today to gain knowledge that may enable it to expand into different markets at a later date.
D) A company invests in a jet aircraft so that its CEO, who must travel frequently, can arrive for distant meetings feeling less tired than if he had to fly commercial.
E) A company has an option to invest in a project today or to wait a year.
Q2) Which of the following is NOT a real option?
A) The option to buy shares of stock if its price goes up.
B) The option to expand into a new geographic region.
C) The option to abandon a project.
D) The option to switch the type of fuel used in an industrial furnace.
E) The option to expand production if the product is successful.
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Chapter 27: Providing and Obtaining Credit
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29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/24949
Sample Questions
Q1) No Tree Too Tall,Inc.is planning to borrow $12,000 from the bank.The bank offers the choice of a 12 percent discount interest loan or a 10.19 percent add-on,one-year installment loan,payable in 4 equal quarterly payments.What is the effective rate of interest on the 10.19 percent add-on loan?
A) 9.50%
B) 10.19%
C) 15.22%
D) 16.99%
E) 22.05%
Q2) Sunnydale Organics,Inc.harvests crops in roughly 90-day cycles based on a 360-day year.The firm receives payment from its harvests sometime after shipment.Due in part to the firm's rapid growth,it has been borrowing to finance its harvests using 90-day bank notes on which the firm pays 12 percent discount interest.If the firm requires $60,000 in proceeds from each note,what must be the face value of each note?
A) $61,856
B) $67,531
C) $60,000
D) $68,182
E) $67,423
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Page 30
Chapter 28: Advanced Issues in Cash Management and Inventory Control
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17 Verified Questions
17 Flashcards
Source URL: https://quizplus.com/quiz/24950
Sample Questions
Q1) Halliday Inc.receives a $2 million payment once a year.Of this amount,$700,000 is needed for cash payments made during the next year.Each time Halliday deposits money in its account,a charge of $2.00 is assessed to cover clerical costs.If Halliday can hold marketable securities that yield 5 percent,and then convert these securities to cash at a cost of only the $2 deposit charge,what is the total cost for one year of holding the minimum cost cash balance according to the Baumol model?
A) $7,483
B) $187
C) $3,741
D) $374
E) $748
Q2) If a company increases its safety stock,then its EOQ will go up. A)True
B)False
Q3) A just-in-time system is designed to stretch accounts payable as long as possible. A)True
B)False
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Page 31
Chapter 29: Pension Plan Management
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10 Verified Questions
10 Flashcards
Source URL: https://quizplus.com/quiz/24951
Sample Questions
Q1) From a pure cost standpoint,a firm with a defined contribution plan would be more likely to hire older workers than a firm with a defined benefit plan.
A)True
B)False
Q2) Kumar Consulting operates several stock investment portfolios that are used by firms for investment of pension plan assets.Last year,one portfolio had a realized return of 12.6 percent and a beta coefficient of 1.15.The average T-bond rate was 7 percent and the realized rate of return on the S&P 500 was 12 percent.What was the portfolio's alpha?
A) -0.75%
B)-0.15%
C) 0%
D) 0.15%
E) 0.75%
Q3) Under a defined contribution plan,employees agree to contribute some percentage of their salaries,up to 20 percent,to the firm's pension fund.
A)True B)False
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Chapter 30: Financial Management in Not For Profit
Businesses
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10 Verified Questions
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Sample Questions
Q1) Which of the following statements about project risk analysis in not-for-profit firms is incorrect?
A) A project's corporate beta measures the contribution of the project to the overall corporate risk of the firm.
B) A project's corporate beta is found (at least conceptually) by regressing returns on the project against returns on the market portfolio.
C) A project's corporate beta is defined as ( \(\sigma\)<sub>P</sub>/ \(\sigma\)<sub>F</sub>)r<sub>PF</sub>, where \(\sigma\)<sub>P</sub> is the standard deviation of the project's returns, \(\sigma\)<sub>F</sub> is the standard deviation of the firm's returns, and r<sub>PF</sub> is the correlation among the two sets of returns.
D) In practice, it is usually difficult, if not impossible, to directly measure a project's corporate risk, so project risk analysis typically focuses on stand-alone risk.
E) The market risk of a project is not relevant to not-for-profit firms.
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