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Cost of Capital and capital budget An all equity financed firm is considering the following projects project beta IRR W 0.75 10% X 0.9 10.2%
Cost of Capital and capital budget
An all equity financed firm is considering the following projects
project | beta | IRR |
W | 0.75 | 10% |
X | 0.9 | 10.2% |
Y | 1.2 | 12% |
Z | 1.5 | 15% |
Risk free rate is 5% and market risk premium is 6%.
If the firms overall cost of equity is 11%, which projects should be accepted
Which projects have higher risk than the companys overall risk
Adjust for project risk, which projects should be accepted.
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