Question
Thunder Bay Entertainment Inc. has two separate divisions: DVDrental and sporting goods. The beta of the entire company is 1.25.The beta of the DVD rentals
Thunder Bay Entertainment Inc. has two separate divisions: DVDrental and sporting goods. The beta of the entire company is 1.25.The beta of the DVD rentals division is 0.8 and the beta of thesporting goods division is 1.5. The risk-free rate is 4 percent andthe market risk premium is 7.5 percent. Which of the followingindependent projects should the company undertake?
Project | Industry | CF0 | Perpetual annual CF | |||
I | Sporting goods | $150,000 | $25,000 | |||
II | Sporting goods | $200,000 | $30,000 | |||
III | DVD rental | $50,000 | $6,000 | |||
IV | DVD rental | $80,000 | $7,500 |
| Projects I and II |
| Projects I and III |
| Projects II and IV |
| Projects III and IV |
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Accounting
Authors: Carl s. warren, James m. reeve, Philip e. fess
21st Edition
978-0324400205, 324225016, 324188005, 324400209, 9780324225013, 978-0324188004
