Question
You are evaluating the following four projects: Project Beta Projected (or Expected) Return A 1.80 19.5% B 1.20 14.0% C 0.80 11.5% D 0.50 7.0%
You are evaluating the following four projects:
| Project | Beta | Projected (or Expected) Return |
| A | 1.80 | 19.5% |
| B | 1.20 | 14.0% |
| C | 0.80 | 11.5% |
| D | 0.50 | 7.0% |
Your companys current practice is to apply its WACC of 12% as a single hurdle rate to all projects. Under your companys current practice, which project(s) of the four projects above would be incorrectly accepted? Currently, the 3-month Treasury bill rate is 3%, and the market risk premium is 10%. (Hint: Measure the RADRs using the CAPM.) Group of answer choices At least two of the projects are incorrectly accepted.
A B C D
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Managerial Finance
Authors: Alan Parkinson
1st Edition
0750618264, 978-0750618267
