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Cash Flows -42 0 Risk Free Rate 2.5% 10 Beta of company's stock 2.1 15 Risk Premium on average stock 5.4% 12 3 13 1 11 Hint: you will need to apply the CAPM to estimate the 2 13 firm's cost of equity capital. 3 12 4 11 Please compare the IRR to the cost of capital: 5 15 16 12 IRR 17 13 Cost of Capital (Required Return) 18 20 Difference (IRR - Cost of Capital) 19 20 21 22 23 1. What is the difference in IRR and cost of capiall 24 A Between 10.0% and -4,0% 25 B Between -4,0% and 0.0% 26 C Between 0.0% and 4.0% 27 D Between 4.0% and 10.0% 28 29 30 2. Should the firm accept the projecte 31 A Yos 32 B No Sheet1 9 (2) 9 (3) 9 (5) 9 (6) 9 (7) 9 (4) 9 (8) 9 (9) 9