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I don't understand this problem answer? What is the logic/principle here? Please help! Will write good review =) Suppose that two firms, A and B,
I don't understand this problem answer? What is the logic/principle here? Please help! Will write good review =)
Suppose that two firms, A and B, are considering the same project which has the same risk as firm-261,501 B's overall operations. The project has an IRR of 14.0%. Firm A has a beta of 1.4, while firm B beta is 1.1 If the risk free rate is 5.25% and the market risk premium is 7.0%, which firm(s) r- ASK should take the project? RE= 525+1.4(7) 50591 A only B only RE:525 + 1,4 (7) =/5357. 26k Neither A nor B Cannot be determined without additional information cost of capital should not matter. Only the project risk and its cost of capital matters. As long as ct IRR is greater than project cost of capital, both firms should take up the project NPY O
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