Please provide step by step explaination as I keep getting this question wrong (Note: The following information is the same information that was provided for Question 2. You may wish to use your answer to Question 2 to help youdetermine the answer to this question.)A firm has division in two different industries - clothing and tourism. It is considering two projects, one in each industry. The following table shows thetypical beta of firms operating wholly within those industries, along with the Internal Rate of Return of each project. The risk free rate of return is 5.8% andthe expected return on the market is 11.5%.ProjectIndustryBetaIRRAClothing0.810.76%ВTourism1.413.38%Which project(s) should the firm accept?a. The firm should accept 1 project only - Project A.O b. The firm should accept neither project.O c. The firm should accept both projects.O d. The firm should accept 1.0 project only - Project B.

Frist we need to calculate expected rate of return by using CAPM.The equation under CAPM is given…

ne the answer to this question.) as division in two different industries - clothing and tourism. It is considering two projects, one in each industry. The following table shows the eta of firms operating wholly within those industries, along with the Internal Rate of Return of each project. The risk free rate of return is 5.8% and cted return on the market is 11.5%. Project Industry Beta IRR A Clothing 0.8 10.76% Tourism 1.4 13.38% roject(s) should the firm accept? he firm should accept 1 project only - Project A. ne firm should accept neither project. ne firm should accept both projects. ne firm should accept 1.0 project only - Project B.

ne the answer to this question.) as division in two different industries - clothing and tourism. It is considering two projects, one in each industry. The following table shows the eta of firms operating wholly within those industries, along with the Internal Rate of Return of each project. The risk free rate of return is 5.8% and cted return on the market is 11.5%. Project Industry Beta IRR A Clothing 0.8 10.76% Tourism 1.4 13.38% roject(s) should the firm accept? he firm should accept 1 project only - Project A. ne firm should accept neither project. ne firm should accept both projects. ne firm should accept 1.0 project only - Project B.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 18P

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