If a project has a higher proportion of fixed to variable costs, holding the risk of its
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Question:
If a project has a higher proportion of fixed to variable costs, holding the risk of its revenues constant
- its beta will be higher, hence its cost of capital will be higher
- its beta will be lower, hence its cost of capital will be lower
- its beta will be unaffected, since beta does not measure the sensitivity of the project's cash flows to market risk
- its financial leverage will be higher
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