An all-equity firm is considering the following projects:

Project	Beta			IRR
W		.69			10.3	%
X		.76			10.8
Y		1.41			14.3
Z		1.52			17.3

The T-bill rate is 5.3 percent, and the expected return on the market is 12.3 percent.

a.

Compared with the firm's 12.3 percent cost of capital, Project W has a (Click to select)lowerhigher expected return, Project X has a (Click to select)lowerhigher expected return, Project Y has a (Click to select)lowerhigherexpected return, and Project Z has a (Click to select)lowerhigher expected return.

b.	Project W should be (Click to select)rejectedaccepted, Project X should be (Click to select)rejectedaccepted, Project Y should be (Click to select)rejectedaccepted, and Project Z should be (Click to select)acceptedrejected.

c.

If the firm's overall cost of capital were used as a hurdle rate, Project W would be (Click to select)incorrectly acceptedcorrectly acceptedincorrectly rejectedincorrectly rejected, Project X would be (Click to select)incorrectly acceptedcorrectly acceptedincorrectly rejectedincorrectly rejected, Project Y would be (Click to select)incorrectly rejectedcorrectly acceptedincorrectly rejectedincorrectly accepted, and Project Z would be (Click to select)incorrectly rejectedcorrectly acceptedincorrectly rejectedincorrectly accepted.