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World Corporation has traditionally employed a firm - wide discount rate for capital budgeting purposes. However, its two divisions, publishing and entertainment, have different degrees
World Corporation has traditionally employed a firmwide discount rate for capital budgeting purposes. However, its two divisions, publishing and entertainment, have different degrees of risk given by beta P beta E while the beta for the overall firm is The publishing division has proposed three projects with the following internal rates of return: P percent; P percent; and P percent. The entertainment division has presented their three projects: E percent; E percent; and E percent. The riskfree rate is percent, and the market risk premium is percent. Identify which projects will be accepted if the firm applies its overall beta to all projects. Then identify which projects will be accepted if the division betas are properly applied.
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