📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      A firm evaluates two projects with identical expected

      cash flows, but Project A has higher variability. If the firm is risk-averse, what would be its decision?
      A Prefer Project A due to potential for high return Correct Answer Incorrect Answer
      B Indifferent to both projects Correct Answer Incorrect Answer
      C Prefer Project with lower standard deviation Correct Answer Incorrect Answer
      D Choose project with higher NPV only Correct Answer Incorrect Answer
      E Prefer the project that maximizes risk-adjusted return Correct Answer Incorrect Answer

      Solution

      Risk-averse firms prefer certainty. Given equal expected returns, lower standard deviation (risk) is preferable. This is aligned with decision-making under uncertainty.

      Practice Next
      More Financial Statement Analysis Questions