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Consider the case of another company. Kim Printing is evaluating two mutually exclusive projects. They both require a $1 million investment today and have expected NPVs of $200,000. Management conducted a full risk analysis of these two projects, and the results are shown below. Risk Measure Project A Project B Standard deviation of project’s expected NPVs $80,000 $120,000 Project beta 1.2 1.0 Correlation coefficient of project cash flows (relative to the firm’s existing projects) 0.7 0.5

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Consider the case of another company. Kim Printing is evaluating two mutually exclusive projects. Th...
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