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An all-equity firm is considering the following projects: Project Beta IRR A 0.75 8.4% B 0.95. 12.6% C 1.15 13.5% D 1.32 14.5% E 1.45
An all-equity firm is considering the following projects:
Project | Beta | IRR |
A | 0.75 | 8.4% |
B | 0.95. | 12.6% |
C | 1.15 | 13.5% |
D | 1.32 | 14.5% |
E | 1.45 | 15.9% |
The T-bill rate is 3 percent, and the expected return on the market is 12 percent.
a. Which projects have a higher expected return than the firms 13 percent cost of capital?
b. Which projects should be accepted? Why? Please give detailed explanation for better understanding
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