You look at the rate of returns, and the betas of different capital investment options. To determine which should be pursued, you will look at Internal Rate of Return, the Capital Asset Pricing Model (Security Market Line), and the Weighted Average Cost of Capital. The expected return on the market is 12.4%, and the risk-free rate is 5.4%. Project Z: return = 17.4% , beta = 1.78 Project X: return = 10.9% , beta = .94 Project W: return = 10.4% , beta = .51 Project Y: return = 14.4% , beta = 1.06 a. Which projects should be accepted using the CAPM(SML) rule? b. Which projects have a higher/lower expected return than the firms 12.4% weighted average cost of capital (WACC)?

c. Which projects will be incorrectly accepted/rejected or correctly accepted/rejected if the firm's weighted average cost of capital was only used as the decision rule?