Question
If a company's beta is greater than one and it calculates its cost of equity based on the classical CAPM instead of the tax-adjusted CAPM,
If a company's beta is greater than one and it calculates its cost of equity based on the classical CAPM instead of the tax-adjusted CAPM, is it more likely to reject acceptable projects or accept projects that should be rejected? Why?
Calculating the Weighted Average Cost of Capital (WACC) B COMPUTING THE COST OF EQUITY FOR MERCK USING THE MARKET RISK PREMIUM E(rm) - rt Page96!B2 Page 100!B5 12.84% < Page98!B3 2.00%
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Intermediate Financial Management
Authors: Eugene F Brigham, Phillip R Daves
14th Edition
0357516664, 978-0357516669
