Question
Draw the securities market line (SML) when the bond ratio is 10% and the market risk premium is 8%. Calculate the cost of capital for
Draw the securities market line (SML) when the bond ratio is 10% and the market risk premium is 8%. Calculate the cost of capital for the following projects. Which of the following capital investments has a positive NPV? Explain why?
project | Beta | Internal rate of return (% |
P | 1.0 | 20 |
Q | 0 | 10 |
R | 2.0 | 25 |
S | 0.4 | 16 |
T | 1.6 | 25 |
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
15th edition
1337671002, 978-1337395250
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