1. Project risk versus portfolio risk Consider a firm to be a portfolio of several projects. The contribution of a project's risk to the firm's risk will be referred to as the beta risk of a project. This is different from the total risk involved in a particular project itself. The of a project refers to the risk involved with the success or failure of a project. portfolio risk Cons ase: stand-alone risk Consider the following case: Leopold owns a smart phone application development company. The cost involved in developing a new application is around $5,000. Given that there are thousands of mobile phone applications in the market, the probability of an application becoming successful in the market is 24%. However, if it is successful, each app can generate profits up to $50,000. Leopold's company develops more than 12 applications a year and records the entire development cost of the application as a loss if any app is not successful. Leopold's company can expect to earn return. Classifying the 76% failure rate as "hig 3,416.67% dustry, this example shows that: A project with high project ri 164.00% e high beta or systematic risk. 12,266.67% gh beta or systematic risk. 7,900.00% A project with high project ri Leopold is thinking about expanding into the website development business. The website development business has a lower beta than the mobile application development business and is not positively correlated to the mobile application development business. With this expansion, the beta of Leopold's firm is likely to It is important for diversit increase well as small business owners like Leopold to evaluate their project risk along with their beta risk. There are decrease t risk. When comparing two projects, when is the standard deviation of a project's cash flows an appropriate several methods of evalu measure of project risk? It is important for diversified firms as well as small business owners like Leopold to evaluate their project risk along with their beta risk. There are several methods of evaluating project risk. When comparing two projects, when is the standard deviation of a project's cash flows an appropriate measure of project risk? When the two projects have the same project outlay When the two projects have different project outlay