Draw the security market line when the Treasury bill rate is 4% and the market risk premium
Question:
Draw the security market line when the Treasury bill rate is 4% and the market risk premium is 7%. What are the project costs of capital for new ventures with betas of .75 and 1.75? Which of the following capital investments have positive NPVs?
| Project | Beta | Internal Rate of Return, % |
| P | 1.00 | 14.00% |
| Q | 0.00 | 6.00% |
| R | 2.00 | 18.00% |
| S | 0.40 | 7.00% |
| T | 1.60 | 20.00% |
| Risk-free rate | 4.00% | |
| Market risk premium | 7.00% | |
| Beta (a) | 0.75 | |
| Beta (b) | 1.75 |
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Given data Project Beta Internal Rate of Return P 100 1400 Q 000 600 R 200 18...View the full answer
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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