Taussig Technologies is thinking of two potential projects, X and Y. In assessing projects' risks, company estimated beta of each project versus both company's other assets and stock market, and it also conducted thorough scenario and simulation analyses. This research made the following numbers: Correlation of project cash flows with cash flows from presenly existing projects. Cash flows are not correlated with cash flows from existing projects. Cash flows are highly related with cash flows from existing projects.
Project X Project Y
Expected NPV $350,000 $350,000
Standard deviation (NPV) $100,000 $150,000
Project beta (vs. market) 1.4 0.8
Correlation of project cash flows with cash flows from presently existing projects. Cash flows are not correlated with cash flows from existing projects. Cash flows are highly correlated with cash flows from existing projects.
Which of the given statements is right?
Project X has more stand-alone risk than Project Y.
Project X has more corporate (or within-firm) risk than Project Y.
Project X has more market risk than Project Y.
Project X has the same level of corporate risk as Project Y.
Project X has less market risk than Project Y.