An all-equity firm is considering the following projects: Project Beta IRR W .80 10.2% .90 1.10...

 

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An all-equity firm is considering the following projects: Project Beta IRR W .80 10.2% .90 1.10 1.35 X Y Z 11.4 12.6 15.1 The T-bill rate is 4 percent, and the expected return on the market is 12 percent. Required: (a) Which projects have a higher expected return than the firm's 12 percent cost of capital? Project w has a (Click to select) + expected return, Project X has a [(Click to select)# expected return, Project Y has a [(Click to select) expected return, and Project z has a (Click to select) expected return. (b) Which projects should be accepted? Project W should be (Click to select), Project X should be (Click to select) +, Project Y should be (Click to select), and Project Z should be (Click to select) + (c) Which projects will be incorrectly accepted/rejected or correctly accepted/rejected if the firm's overall cost of capital were used as a hurdle rate? Project W would be (Click to select) Project X would be (Click to select) would be (Click to select) + and Project Z would be (Click to select) +, Project Y An all-equity firm is considering the following projects: Project Beta IRR W .80 10.2% .90 1.10 1.35 X Y Z 11.4 12.6 15.1 The T-bill rate is 4 percent, and the expected return on the market is 12 percent. Required: (a) Which projects have a higher expected return than the firm's 12 percent cost of capital? Project w has a (Click to select) + expected return, Project X has a [(Click to select)# expected return, Project Y has a [(Click to select) expected return, and Project z has a (Click to select) expected return. (b) Which projects should be accepted? Project W should be (Click to select), Project X should be (Click to select) +, Project Y should be (Click to select), and Project Z should be (Click to select) + (c) Which projects will be incorrectly accepted/rejected or correctly accepted/rejected if the firm's overall cost of capital were used as a hurdle rate? Project W would be (Click to select) Project X would be (Click to select) would be (Click to select) + and Project Z would be (Click to select) +, Project Y

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a To determine which projects have a higher expected return than the firms 12 percent cost of capita... View the full answer