A project under consideration has an internal rate of return of 18% and a beta of 0.5. The risk-free rate is 6%, and the expected rate of return on the market portfolio is 18%. a. What is the required rate of return on the project? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Should the project be accepted? c. What is the required rate of return on the project if its beta is 1.50? (Do not round intermediate calculations. Enter your answer as a whole percent.) d. If project's beta is 1.50, should the project be accepted? Required rate of return Accept the project a. % b. c. Required rate of return % d. Accept the project
Q: 7- As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were…
A: The hurdle rate for a project or investment is the minimum required rate of return that a company or…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: NPV can be calculated by following function in excel =NPV(rate,value1,[value2],…) + Initial…
Q: What is the expected value of the outcomes?
A: Expected income is also called the expected return. It is the profit or loss expected to be…
Q: The four alternatives described below are being evaluated.a. If the proposals are independent, which…
A: The minimum possible required return at which a company is willing to invest its funds is term as…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: IRR is a rate at which the present value of cash flows are equal to the present value of cash…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A:
Q: A project under consideration has an internal rate of return of 13% and a beta of 0.6. The risk-free…
A: Internal rate of return is the rate at which net present value of the project (net present value of…
Q: A project under consideration has an internal rate of return of 14% and a beta of 0.6. The risk-free…
A: Financial statements are statements which states the business activities performed by the company .…
Q: An all-equity firm is considering two projects. Project A has a beta of 0.5 and the IRR if 12%. For…
A: Since you have posted a question with multiple sub-parts, we will solve first three sub parts for…
Q: A firm with a WACC of 12% is considering the following projects: Project Beta IRR 10.50% w 0.75 0.90…
A: CAPM model defines a relation between the types of risk namely systematic risk and unsystematic…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: NPV can be calculated by following function in excel =NPV(rate,value1,[value2],…) + Initial…
Q: Which one of the projects O, M, N, L should be selected? The expected return on the market is 16%…
A: Risk Free Rate = 6% Expected Market Return = 16%
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: IRR(Internal rate of return) is the rate for cash flows with at least one negative cash flow that…
Q: An all-equity firm is considering the projects shown below. The T-bill rate is 3 percent and the…
A: Project specific benchmarks refers to the project specific required return. It can be calculated…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: Required return = 11% Time: 0 1 2 3 4 5 Cash flow: –$235,000 $65,800 $84,000 $141,000 $122,000…
Q: Suppose two all equity-financed firms, Firm X and Firm Y, are considering the same new project that…
A: Computation of required rate of return of Firm X is as follows:=Risk free rate+Beta×Market risk…
Q: Suppose that a project has an Internal Rate of Return of 9% and a beta of 1.0. The current risk-free…
A: Net present worth (NPV) is the differentiation between the current worth of cash inflows and the…
Q: A project under consideration has an internal rate of return of 13% and a beta of 0.8. The risk-free…
A: CAPM is the model of valuing the required rate of return an investor wants from a company, It is the…
Q: An investment banker has recommended a $100,000 portfolio containing assets B, D, and F. $20,000…
A: Total Investment = $100,000 Investment in asset B= $20,000 with beta of 1.5 Investment in asset D =…
Q: A project under consideration has an internal rate of return of 16% and a beta of 0.9. The risk-free…
A: First we need to calculate required rate of return based on CAPM. The equation is Required rate of…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: MIRR can be calculated by following function in excel =MIRR (values, finance_rate, reinvest_rate)…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: Calculation of Profitability Index (PI):The profitability index (PI) is 0.92.Excel Spreadsheet:
Q: A firm is considering a capital investment. The risk premium is 0.04, and it is considered to be…
A: A beta of a stock is the degree of responsiveness to movements in price with changes in the stock…
Q: A firm is considering a project that is expected to have a beta of 1.2. The risk-free rate is 8.3%.…
A: As per CAPM approach required return is equal to risk free rate plus beta times market risk premium…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: NPV is the difference between present value of cahs outflow and present value of cashinflows.…
Q: A project under consideration has an internal rate of return of 14% and a beta of 0.6. The risk-free…
A: Financial statements are statements which states the business activities performed by the company .…
Q: The return expected from the project no. 542 is 22 percent. The standard deviation of these return…
A: Return expected =22%Standard deviation = 11%
Q: Currently under consideration is a project with a beta, b of 1.50. At this time, the risk free rate…
A: This question is related to Capital asset pricing model (CAPM), We require to calculate the required…
Q: ppose your firm is considering investing in a project with the cash flows shown below, that the…
A: MIRR is modified internal rate of return in this it is assumed that reinvestment is done on the cost…
Q: An all-equity firm is considering the following projects: Project Beta IRR W .67 9.5 % X…
A: We have to calculate expected return using CAPM formula.
Q: A project under consideration has an internal rate of return of 1496 and a beta of 0.6. The…
A: Financial statements are statements which states the business activities performed by the company .…
Q: The risk-free rate of a capital-budgeting project a company wants to undergo is 5% and the expected…
A: given, Rf=5% Rm=10% beta =0.3 according to CAPM model: Return =rf+beta×rm-rfwhere,rf=risk free…
Q: Suppose your fiem is considering investing in a project with the cash flows shown below, that the…
A: The NPV is calculated as present value of cash inflows minus initial cost. If the NPV of the project…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: A method of capital budgeting that helps to evaluate the present worth of cash flow and a series of…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: YEAR CASH FLOW 0 $ (295,000.00) 1 $…
Q: If the firm uses its current WACC of 12 percent to evaluate the projects, which project(s), if any,…
A: It is the discounted rate that has been calculated by the company on the basis of which present…
Q: A project under consideration has an internal rate of return of 14% and a beta of 0.6. The risk-free…
A: Financial statements are statements which states the business activities performed by the company .…
Q: A project under consideration has an internal rate of return of 18% and a beta of 0.5. The risk-free…
A: Part (a): Calculation of required rate of return on project: Answer: Required rate of return is 12%
Q: Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $3,225,000.…
A:
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: YEAR CASH FLOW REQUIRED RETURN 11% 0 -238000 1 66100 2 84300 3 141300 4 122300 5…
Q: As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were…
A: Given, Risk Free Rate = 4% Beta = 0.75 Expected Market Return = 11%
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: The table below shows the future value of cash flows for each year.
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: PI ( Profitability index) = Present value of future cash flows / Initial Investment Discounted…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: Calculation of Discounted Payback:The discounted payback is 3.02 years.The project should be…
Q: A project has a beta of 1.24 and the company beta is 1.45. The risk-free rate is 3.8%, and the…
A: Required return for the project = Risk free rate + ( Market rate of return - Risk free rate ) *…
Q: Suppose your firm is considering investing in a project with the cash flows shown below, that the…
A: The MIRR required calculation of future value of cash inflows. The compounded annual growth rate of…
Q: The Treasury bill rate is 2% and the market risk premium is 7%. Project Beta Internal Rate of…
A: Project costs of capital = Risk free rate + beta x Market risk premiumRisk free rate = The Treasury…
Q: Beta of a project. Vespucci is adding a project to the company portfolio and has the following…
A: Capital asset pricing model is the relationship between systematic return and return of all the…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- A project under consideration has an internal rate of return of 18% and a beta of 0.5. The risk-free rate is 6%, and the expected rate of return on the market portfolio is 18%. a. What is the required rate of return on the project? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Should the project be accepted? c. What is the required rate of return on the project if its beta is 1.50? (Do not round intermediate calculations. Enter your answer as a whole percent.) d. If project's beta is 1.50, should the project be accepted?A project under consideration has an internal rate of return of 13% and a beta of 0.6. The risk-free rate is 8%, and the expected rate of return on the market portfolio is 13%. a. What is the required rate of return on the project? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. Should the project be accepted? Y/N c. What is the required rate of return on the project if its beta is 1.60? (Do not round intermediate calculations. Enter your answer as a whole percent.) d. If project's beta is 1.60, should the project be accepted? Y/NA project under consideration has an internal rate of return of 17% and a beta of 0.5. The risk-free rate is 9% and the expected rate of return on the market portfolio is 17%. A. What is the required rate of return on the project? B. Should the project be accepted? C. What is the required rate of return on the project if the beta is 1.50? D. If projects beta is 1.50, should the project be accepted?
- A project under consideration has an internal rate of return of 16% and a beta of 0.9. The risk free rate is 6% and the expected rate of return on the market portfolio is 16%. A. What is the required rate of return? B. Should the project be accepted? C. What is the required rate of return on the project if it's beta is 1.90? D. If the projects beta is 1.90 should the project be accepted?Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6 Cash Flow -1,040 140 460 660 660 260 660 Use the NPV decision rule to evaluate this project; should it be accepted or rejected?Which one of the projects O, M, N, L should be selected? The expected return on the market is 16% and the risk-free rate is 6%. Group of answer choices Project O, which has a beta of 0.50 and has an expected return of 11.1%. Project M, which has a beta of 2.50 and has an expected return of 29.4%. Project N, which has a beta of 1.25 and has an expected return of 18.3%. Project L, which has a beta of 1.00 and has an expected return of 15.9%.
- 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 1.7 Calculate the project-specific benchmarks for each project. (Round your answers to 2 decimal places.) Project A: ____.__% Project B: ____.__% Project C: _____.__% Project D: ____.__% If the firm uses its current WACC of 12 percent to evaluate these projects, which project(s), will be incorrectly accepted? Project A Project B Project C Project DAn all-equity firm is considering the projects shown below. The T-bill rate is 4 percent and the market risk premium is 7 percent. If the firm uses its current WACC of 12 percent to evaluate the projects, which project(s), if any, will be incorrectly accepted? Expected Return Beta Project A 8.0% 0.5 Project B 19.0% 1.2 Project C 13.0% 1.4 Project D 17.0% 1.6As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were instructed to use the IRR method, and you need to determine an appropriate hurdle rate. The risk-free rate is 4%, and the expected market rate of return is 11%. Your company has a beta of 0.75, and the project that you are evaluating is considered to have risk equal to the average project that the company has accepted in the past. According to CAPM, the appropriate hurdle rate would be A. 15%. B. 9.25%. C. 4%. D. 11%. E. 0.75%
- A firm is considering a capital investment. The risk premium is 0.04, and it is considered to be constant through time. Riskless investmentsmay now be purchased to yield 0.06 (6%). If the project’s beta (β) is 1.5, what is the expected return for this investment?A firm must decide between investing in two alternative risky projects, each requiring the same initial investment. Project A has an equal probability of four possible payoffs: $80m, $100m, $120m or $140m. Project B has a 50:50 chance of a payoff of $90m or $126m. Assuming that the firm’s managers are risk averse, which project would they prefer, and why?A project has a forecasted cash flow of $121 in year 1 and $132 in year 2. The interest rate is 8%, the estimated risk premium on the market is 10.25%, and the project has a beta of 0.61. If you use a constant risk-adjusted discount rate, answer the following:a. What is the PV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the certainty-equivalent cash flow in year 1 and year 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.) c. What is the ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and 2? (Do not round intermediate calculations. Round your answers to 2 decimal places.)