An all-equity firmi is considering the following projects: Project W X Y Z Beta 0.75 0.90...

 

Transcribed Image Text:

An all-equity firmi is considering the following projects: Project W X Y Z Beta 0.75 0.90 1.20 1.50 IRR 10% 10.2 12.0 15.0 The T-bill rate is 5 percent, and the expected return on the market is 11 percent. a. Which projects have a higher expected return than the firm's 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 was used as a hurdle rate? An all-equity firmi is considering the following projects: Project W X Y Z Beta 0.75 0.90 1.20 1.50 IRR 10% 10.2 12.0 15.0 The T-bill rate is 5 percent, and the expected return on the market is 11 percent. a. Which projects have a higher expected return than the firm's 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 was used as a hurdle rate?

Answer rating: 100% (QA)

a To determine which projects have a higher expected return than the firms 11 percent cost of capita... View the full answer