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ts bond beta is 0.2. Korbell is subjected to the same tax rate as Brandwine. Based on this information (and on y te of ma Brandywine's stock beta), what discount rate would you fecommend for projects in the Brandy and in the Wine divisions of Brandywine? 16. with investments) A company is deciding whether to issue stock to raise money for an investment project which has the same risk as the market and an expected return of 15%. If the risk-free rate is 5% and the expected return on the market is 12%, which of the following is correct? The company should not proceed with the investment. a. b. The company should proceed with the investment regardless of the company's beta. The company should proceed with the investment unless the com- pany's beta is greater than 1.25. c. d. The company should proceed with the investment unless the com- pany's beta is less than 1.25. 17. (WACC and investment decision) The project whose cash flows are given below has = 1.6. If the market return E (w)-10% and the risk-free rate ,,-3%, should the firm undertake the project? EVALUATION OF A RISKY PROJECT 2 Year 3 Expected cash flow-100 60 50-40 5 10% expect the stock to pay a year-end dividend of $3. The T-bill rate is 2%, and a. What is the investors' expectation of the price of the stock at the end b. Suppose investors actually believe the stock will sell for $54 at year- (Stock expected price) A stock with a beta of 0.75 now sells for $50. Investons 18. the market risk premium is 5%. of the year? end. Is the stock a good or bad buy? What will investors do? At what point will the stock reach an equilibrium at which it again is perceived as fairly priced