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2) An all equity firm is considering the following projects: Project beta Expected Return W 0.75 10% X 0.9 10.2 Y 1.2 12.0 Z 1.5
2) An all equity firm is considering the following projects:
Project beta Expected Return
W 0.75 10%
X 0.9 10.2
Y 1.2 12.0
Z 1.5 15
Assume that the firm has a overall cost of capital of 11%assume that the T Bill is 5%, and the market return is 11 % expected
- Which projects should be accepted?
- Which projects will be incorrectly accepted or rejected if the firm used its overall cost of capital as a hurdle rate?
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