Question

A firm is managing five major projects. The value of the firm is the __________ of the net present values of the projects, and the risk level of the firm is the __________ of the projects adjusted for debt financing.

• A: average; sum of the betas

• B : sum; average beta

• C : sum; sum of the betas

Can someone help me with this question?

Answer 1

A firm is managing five major projects. The value of the firm is the sum of the net present values of the projects, and the risk level of the firm is the Average beta of the projects adjusted for debt financing.

Option B is correct.

For Firm value we always add the present value of all the projects and beta is never added for different projects to calculate the beta of the firm, Beta is always weghted average of all the projects.

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