12. Dewan Sugar Mills Limited is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC or negative, in both cases it will be rejected. Year 0 2 3 4 5 Cash flows -$1,250 $325 $325 $325 $325 $325 (a) 9.43% (b) 10.40% (c) 9.91% (d) 11.47% (e) 10.92% 11. Which of the following statements is CORRECT? (a) Beta measures market risk, which is generally the most relevant risk measure for a publicly-owned firm that seeks to maximize its intrinsic value. However, this is not true unless all of the firm's stockholders are well diversified. (b) An increase in the risk-free rate is likely to reduce the marginal costs of both debt and equity. (e) The relevant WACC can change depending on the amount of funds a firm raises during a given year. Moreover, the WACC at each level of funds raised is a weighted average of the marginal costs of each capital component, with the weights based on the firm's target capital structure. (d) The bond-yield-plus-risk-premium approach to estimating the cost of common eq- uity involves adding a risk premium to the interest rate on the company's own long-term bonds. The size of the risk premium for bonds with different ratings is published daily in The Wall Street Journal. (e) The WACC is calculated using a before-tax cost for debt that is equal to the interest rate that must be paid on new debt, along with the after-tax costs for common stock and for preferred stock if it is used. 3. Sargodha Spinning Mills Limited is using the CAPM model to estimate the required return on its stock traded on KSE, which of the following factors can be determined with the most precision? (a) The beta coefficient, bi, of a relatively safe stock. (b) The most appropriate risk-free rate, rRF. (c) The market risk premium (RPM). (a) The beta coefficient of the market," which is the same as the beta of an average stock (e) The expected rate of return on the market, rM