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Mushtaq Limited is considering two possible investment projects. Both the projects have a life of one year only. The returns from new projects are uncertain
Mushtaq Limited is considering two possible investment projects. Both the projects have a life of one year only. The returns from new projects are uncertain and depend upon the growth rate of the economy. Estimated returns at different levels of economic growth are shown below: Economic Growth Probability of (Annual Avg.) Occurrence Returns (%) Project 2 Project 1 Market 1% 0.25 20 22 30 3% 0.50 30 28 25 5% 0.25 40 40 40 Risk free rate of return is 10%. Required Evaluate the above projects using the Capital Assets Pricing Model. (Marks 10)
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