SML and WACC:

An all$-$equity firm is considering the following projects:

Suppose that:

The T$-$bill rate $=5\%$

The expect return on the market $=12\%$

$-$Which projects have a higher expected return than the firm's $12\%$ cost of capital?

Answer:

$-$Which projects should be accepted?

Answer:

$-$Which projects will be incorrectly accepted or rejected if the firm's overall cost of capital were

used as a hurdle rate?

Answer: