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An all-equity firm is considering the following projects: Project Beta IRR W .57 9.1 % X...

An all-equity firm is considering the following projects:
Project Beta IRR
W .57 9.1 %
X .88 9.8
Y 1.12 12.2
Z 1.48 15.3

The T-bill rate is 4.3 percent, and the expected return on the market is 11.3 percent.

Please select one option in every parenthese. Those are the answers.

a.

Compared with the firm's 11.3 percent cost of capital, Project W has a (lower or higher) expected return, Project X has a (lower or higher) expected return, Project Y has a (lower or higher) expected return, and Project Z has a (higher or lower) expected return.

b.

Project W should be (rejected or accepted), Project X should be (rejected or accepted), Project Y should be (rejected or accepted), and Project Z should be(rejected or accepted).

c.

If the firm's overall cost of capital were used as a hurdle rate, Project W would be (correctly rejected or correctly accepted or incorrectly rejected or correctly accepted), Project X would be (correctly rejected or correctly accepted or incorrectly rejected or correctly accepted), Project Y would be (correctly rejected or correctly accepted or incorrectly rejected or correctly accepted), and Project Z would be (correctly rejected or correctly accepted or incorrectly rejected or correctly accepted)

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jeff jeffy answered 2 years ago
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