An all-equity firm is considering the projects shown below. The T-bill rate is 3 percent and the market risk premium is 8 percent. PROJECT EXPECTED RETURN BETA A 8 % 0.6 B 20 1.3 C 14 1.5 D 18
hona10
hw.docx|
An all-equity firm is considering the projects shown below. The T-bill rate is 3 percent and the market risk premium is 8 percent. |
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PROJECT |
|
EXPECTED RETURN |
|
BETA |
|
||
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A |
|
|
8 |
% |
|
0.6 |
|
|
B |
|
|
20 |
|
|
1.3 |
|
|
C |
|
|
14 |
|
|
1.5 |
|
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D |
|
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18 |
|
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1.7 |
|
|
|
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Calculate the project-specific benchmarks for each project. (Round your answers to 2 decimal places.) |
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|
|
|
Project A |
% |
|
Project B |
% |
|
Project C |
% |
|
Project D |
% |
|
|
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If the firm uses its current WACC of 12 percent to evaluate these projects, which project, will be incorrectly rejected? |
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