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You will analyze four projects that your company wants to invest in. You are going to use two different methods to evalute these projects. Knowing
You will analyze four projects that your company wants to invest in. You are going to use two different methods to evalute these projects. Knowing you want to evaluate the expected return using the security market line, you calculated beta for each. The betas are listed in order; .67 (W), .74 (X), 1.37 (Y), and 1.48 (Z). You also solved the IRR of each project to get a rate of return. In order the results are 9.5% (W), 10.6% (X), 14.1% (Y), and 17.1% (Z). The Risk-free rate is 5.1%, and the expected return on the market is 12.1%. a. Which projects have a higher/lower expected return than the firm's 12.1% weighted average cost of capital (WACC)? expected return, Project X has a expected return, Project Y has a Project W has a expected return, and Project Z has a expected return. b.Which projects should be accepted using the SML rule? Project W should be Project Y should be Project X should be and Project Z should be c. Which projects will be incorrectly accepted/rejected or correctly accepted/rejected if the firm's weighted cost of capital were used as a hurdle rate? Project W would be Project Y would be Project X would be , and Project Z would be
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