Now, suppose that two companies are looking at the same project. Company A has a beta of
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Now, suppose that two companies are looking at the same project. Company "A" has a beta of 1.5 and a cost of capital of 25%. Company "B" has a beta of 0.8 and a cost of capital of 15%. When evaluated at a rate of 15%, the project shows an NPV of +$5 million, and when evaluated at a rate of 25%, the project shows an NPV of -$2 million. Should either company accept the project, and if so, under what conditions?
Please explain your reasoning of how you came to the conclusion that you did.
Related Book For
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart
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