Question
Wolff Enterprises must consider one investment project using the capital asset pricing model (CAPM). Relevant information is presented in the following table. Item Rate of
Wolff Enterprises must consider one investment project using the capital asset pricing model (CAPM). Relevant information is presented in the following table.
| Item | Rate of return | Beta, b | |
| Risk-free asset | 7% | 0.00 | |
| Market portfolio | 14% | 1.00 | |
| Project | 0.64 | ||
a.Calculate the required rate of return for the project, given its level of nondiversifiable risk.
b.Calculate the risk premium for the project, given its level of nondiverisifiable risk.
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Finance For Managers
Authors: Harvard Business School Press
1st Edition
1578518768, 978-1578518760
