An all-equity firm is considering the following projects:

Project	Beta	Expected Return
W	.70	11%
X	.95	13
Y	1.05	14
Z	1.60	16

The T-bill rate is 5 percent, and the expected return on the market is 12 percent.

Assume the companys overall WACC is 12%.

Which projects have a higher expected return than the firms 12 percent cost of capital?

Which projects should be accepted?

Which projects would be incorrectly accepted or rejected if the firms over-all cost of capital were used as a hurdle rate?

Which of the following is false regarding the estimation of a firms cost of equity

capital?

There are models that will provide reasonable estimates.

The cost of equity is equal to the weighted average cost of capital.

The cost of equity depends on the systematic risk of the firms equity.

All of the above