2) An all equity firm is considering the following projects: Project beta Expected Return W 0.75...

2) An all equity firm is considering the following projects:

Project beta Expected Return

W 0.75 10%

X 0.9 10.2

Y 1.2 12.0

Z 1.5 15

Assume that the firm has a overall cost of capital of 11%assume that the T Bill is 5%, and the market return is 11 % expected

Which projects should be accepted?
Which projects will be incorrectly accepted or rejected if the firm used its overall cost of capital as a hurdle rate?

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