An all-equity firm is considering the following projects: The expected return on the market is 12 per
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An all-equity firm is considering the following projects:
The expected return on the market is 12 per cent, and the current rate on UK gilts is 5 per cent.
(a) Which projects have a higher expected return than the firm’s 12 per cent cost of capital?
(b) Which projects should be accepted?
(c) Which projects would incorrectly be accepted or rejected if the firm’s overall cost of capital were used as a hurdle rate?
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Related Book For 
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe
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