Question
An all-equity firm is considering the projects shown in the table below. The T-bill rate is 3% and the market risk premium is 6%. If
An all-equity firm is considering the projects shown in the table below. The T-bill rate is 3% and the market risk premium is 6%. If the firm uses its current WACC of 8% to evaluate these projects, which project(s), if any, will be INCORRECTLY rejected, and which projects, if any, will be INCORRECTLY accepted?
| Project | Expected Return | Beta |
| A | 4% | .3 |
| B | 7% | .5 |
| C | 9% | 1.1 |
| D | 13% | 1.4 |
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
