Question
An all-equity firm is considering the following Projects Projects Beta Expected return % Gamma 0.78 15% Mega 1.36 13% Maxi 1.40 16% Assume the T-bill
An all-equity firm is considering the following Projects
| Projects | Beta | Expected return % |
| Gamma | 0.78 | 15% |
| Mega | 1.36 | 13% |
| Maxi | 1.40 | 16% |
Assume the T-bill rate is 5% and the market risk premium is 11%. The firms cost of capital is 15%. which projects would be incorrectly rejected if the firms overall cost of capital is used as a hurdle rate?
a. Mega
b. Gamma and maxi
c. Gamma
d. None
e. Maxi
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Public Finance
Authors: Harvey S Rosen, Ted Gayer
9th International Edition
0071267883, 9780071267885
