12. CAPM and Cost of Capital. Draw the security market line when the Treasury bill rate is 4% and the market risk premium is 7%. What are the project costs of capital for new ventures with betas of .75 and 1.75? Which of the following capital investments have positive NPVs? (LO3)

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Project Beta Internal Rate of Return, % PSRST 1.0 14 Q 0 6 2.0 18 0.4 1.6 72