Thunder Bay Entertainment Inc. has two separate divisions: DVDrental and sporting goods. The beta of the entire company is 1.25.The beta of the DVD rentals division is 0.8 and the beta of thesporting goods division is 1.5. The risk-free rate is 4 percent andthe market risk premium is 7.5 percent. Which of the followingindependent projects should the company undertake?

Project		Industry		CF0		Perpetual annual CF
I		Sporting goods		$150,000		$25,000
II		Sporting goods		$200,000		$30,000
III		DVD rental		$50,000		$6,000
IV		DVD rental		$80,000		$7,500

Projects I and II

Projects I and III

Projects II and IV

Projects III and IV

Answer rating: 100% (QA)

Project 1 III IV Project Cf0 I Cf0 IV 150000 200000 50000 80000 Annu... View the full answer