Question
In: Finance
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) |
Solutions
jeff jeffy answered 3 years agoRelated Solutions
An all-equity firm is considering the following projects: Project Beta IRR W .59 8.9 % X...
An all-equity firm is considering the following projects:
Project Beta IRR
W .59 8.9 %
X .86 9.6
Y 1.14 12.0
Z 1.46 15.1
The T-bill rate is 4.1 percent, and the expected return on the
market is 11.1 percent.
a. Compared with the firm's 11.1 percent cost of capital,
Project W has a expected return, Project X has a expected return,
Project Y has a expected return, and Project Z has a expected
return.
b. Project W should be...
An all-equity firm is considering the following projects: Project Beta IRR W .70 9.9 % X...
An all-equity firm is considering the following
projects:
Project
Beta
IRR
W
.70
9.9
%
X
.77
10.9
Y
1.43
14.4
Z
1.54
17.4
The T-bill rate is 5.4 percent, and the expected return on the
market is 12.4 percent.
a. Compared with the firm's 12.4 percent cost of
capital, Project W has a (Click to select)higherlower expected
return, Project X has a (Click to select)lowerhigher expected
return, Project Y has a (Click to select)higherlower expected
return, and Project Z...
An all-equity firm is considering the following projects: Project Beta IRR W .80 9.3% X .90...
An all-equity firm is considering the following
projects:
Project
Beta
IRR
W
.80
9.3%
X
.90
10.6
Y
1.10
11.4
Z
1.35
14.1
The T-bill rate is 4 percent, and the expected return on
the market is 11 percent.
Which projects have a higher expected return than the
firm’s 11 percent cost of capital?
Which projects should be accepted?
Which projects will be incorrectly accepted or rejected
if the firm’s overall cost of capital were used as a hurdle
rate?
An all-equity firm is considering the following projects: Project Beta IRR W .80 9.3 %...
An all-equity firm is considering the following projects:
Project
Beta
IRR
W
.80
9.3
%
X
.90
11.4
Y
1.10
12.1
Z
1.35
15.1
The T-bill rate is 4 percent, and the expected return on the
market is 12 percent.
a.
Which projects have a higher expected return than the firm’s 12
percent cost of capital?
b.
Which projects should be accepted?
c.
Which projects will be incorrectly accepted/rejected or
correctly accepted/rejected if the firm's overall...
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?
Porto Berhad is an all-equity firm. The company is considering the following projects: Project Beta Expected...
Porto Berhad is an all-equity firm. The company is considering
the following projects:
Project
Beta
Expected return
Barcelona
0.70
11%
Juventus
0.85
14%
PSG
1.30
16%
Chelsea
1.50
18%
The T-bill rate is 9 percent and the expected return on the
market is 12 percent.
a.Evaluate which projects have higher expected return than the
firm’s 12 percent cost of capital
b. Assess which projects would be incorrectly accepted or
rejected if the firm’s overall cost of capital were used as...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration...
A firm evaluates all of its projects by applying the IRR rule. A
project under consideration has the following cash flows?
YearCash Flow0–$28,000
1 -12,000
2 -15,000
3 -11,000
A firm evaluates all of its projects by applying the IRR rule. A project under consideration...
A firm evaluates all of its
projects by applying the IRR rule. A project under consideration
has the following cash flows:
Year
Cash Flow
0
–$
27,100
1
11,100
2
14,100
3
10,100
1．If the required return is 15 percent, what is the IRR for this
project? (Do not round intermediate calculations. Enter
your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
IRR
%
２．Should the firm accept the project?
No
Yes
A firm evaluates all of its projects by applying the IRR rule. A project under consideration...
A firm evaluates all of its
projects by applying the IRR rule. A project under consideration
has the following cash flows:
Year
Cash Flow
0
–$
27,100
1
11,100
2
14,100
3
10,100
1.If the required return is 15 percent, what is the IRR for this
project? (Do not round intermediate calculations. Enter
your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
IRR
%
2. Should the firm accept the project?
Yes
No
Consider two projects, X and Y. Project X's IRR is 19% and Project Y's IRR is...
Consider two projects, X and Y. Project X's IRR is 19% and
Project Y's IRR is 17%. The projects have the same risk and the
same lives, and each has constant cash flows during each year of
their lives. If the cost of capital is 10%, Project Y has a higher
NPV than X. Given this information, which of the following
statements is CORRECT?
a.
The crossover rate must be greater than 10%.
b.
If the cost of capital...
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