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The ABC Co is considering two projects A and B. Both projects have conventional cash flows. Project A has a beta of 0.9 and it
The ABC Co is considering two projects A and B. Both projects have conventional cash flows. Project A has a beta of 0.9 and it has the expected return of 12.1%. Project B has beta of 1.1 and it has expected return of 10.8%. Required return of the market is 11.5%. The risk-free rate is positive and less then required market return. Are these two projects correctly priced relative to each other?
Yes | ||
No | ||
Cannot be determined without knowing the risk free rate |
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