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 D

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows
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Problem 23SP: Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site....
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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 D

 

 
 
 
 
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