Distinguish among beta risk and stand-alone risk

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Distinguish among beta (or market) risk, within-firm (or corporate) risk, and stand-alone risk for a project being considered for inclusion in a firm's capital budget.

In theory, market risk should be the only "relevant" risk. However, companies focus as much on stand-alone risk as a market risk. What are the reasons for the focus on a stand-alone risk?

Define (a) sensitivity analysis, (b) scenario analysis, and (c) simulation analysis. If GE was considering two projects (one for $500 million to develop a sattelite communications system and the other for a $30,000 new truck) on which project would be company be more likely to use a simulation analysis?

Reference no: EM131861701

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