An all-equity firm is considering the following projects: The T-bill rate is 5 percent, and the expected

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An all-equity firm is considering the following projects:

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 fi rm’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 were used as a hurdle rate?

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Fundamentals of corporate finance

ISBN: 978-0073382395

9th edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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