Business, 17.01.2020 23:31 ciarra31

An all-equity firm is considering the following projects:

project beta expected return
w .75 8.9%
x .90 10.8
y 1.15 12.8
z 1.45 13.9
the t-bill rate is 4 percent, and the expected return on the market is 11 percent.

a) which projects have a higher expected return than the firms 11 percent cost of capital?

b) which projects should be accepted?

c) which projects would be incorrectly accepted or rejected if the firm's overall cost of capital were used as a hurdle rate?

Answers: 3

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An all-equity firm is considering the following projects:

project beta expected return...