An all-equity firm is considering the following projects:

Project	Beta	IRR
W	0.60	8.8%
X	0.85	9.5
Y	1.15	11.9
Z	1.45	15.0

The T-bill rate is 4 percent, and the expected return on the market is 11 percent.

a. Compared with the firm's 11 percent cost of capital, Project W has a (Higher or lower) expected return, Project X has a (Higher or lower) expected return, Project Y has a (Higher or lower) expected return, and Project Z has a (Higher or lower) expected return.

b. Project W should be (accepted or rejected) , Project X should be (accepted or rejected), Project Y should be(accepted or rejected) , and Project Z should be (accepted or rejected) .

c. If the firm's overall cost of capital were used as a hurdle rate, Project W would be (incorrectly accepted/incorrectly rejected/correctly accepted/correctly rejected) , Project X would be (incorrectly accepted/incorrectly rejected/correctly accepted/correctly rejected , Project Y would be (incorrectly accepted/incorrectly rejected/correctly accepted/correctly rejected, and Project Z would be(incorrectly accepted/incorrectly rejected/correctly accepted/correctly rejected.

Please choose one option from each bracket.

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