The treasury bill rate is 4% and the market risk premium is 6%. A. What are the project costs of capital for new ventures with betas of 0.50 and 1.64? B. Which of the capital investments shown above have positive (non-zero) NPV's?
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The treasury bill rate is 4% and the market risk premium is 6%.
A. What are the project costs of capital for new ventures with betas of 0.50 and 1.64?
B. Which of the capital investments shown above have positive (non-zero) NPV's?
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- The Treasury bill rate is 2% and the market risk premium is 7%. Project Beta Internal Rate of Return, % P 0.90 10 Q 0.00 8 R 3.00 23 S 0.30 9 T 2.60 25 a. What are the project costs of capital for new ventures with betas of 0.65 and 1.65? b. Which of the capital investments shown above have positive (non-zero) NPV's?The Treasury bill rate is 6% and the market risk premium is 7%. Project Beta Internal Rate of Return, % P 1.00 14 Q 0.00 10 R 2.00 20 S 0.40 11 T 1.70 22 a. What are the project costs of capital for new ventures with betas of 0.75 and 1.98?The Treasury bill rate is 3% and the market risk premium is 8%. a. What are the project costs of capital for new ventures with betas of 0.60 and 1.15? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Beta Cost of Capital 0.6 % 1.15 % b. Which of the capital investments (Project P,Q,R,S,T) shown in image have positive (non-zero) NPV's? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
- An all-equity firm is considering the following projects: Project Beta IRR W .67 9.5 % X .74 10.6 Y 1.37 14.1 Z 1.48 17.1 The T-bill rate is 5.1 percent, and the expected return on the market is 12.1 percent. a. Which projects have a higher/lower expected return than the firm’s 12.1 percent cost of capital?An 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% 1.6The Treasury bill rate is 6% and the market risk premium is 7%. Which of the capital investments shown above have positive (non-zero) NPV's? Project Beta Internal Rate of Return, % P 1.00 14 Q 0.00 10 R 2.00 20 S 0.40 11 T 1.70 22
- Piedmont Hotels is an all-equity company. Its stock has a beta of .88. The market risk premium is 7.5 percent and the risk-free rate is 3.9 percent. The company is considering a project that is considers riskier that its current operations so it wants to apply an adjustment of 2.3 percent to the project's discount rate. What should the firm set as the required rate of return for the project?Suppose Firm 1 is 100% equity financed. Firm 1 has a project available that offers a 10% return on average and has the same systematic risk as Firm 1. Assume that the risk-free rate is 2%, the stock market return premium (Rm - Rf) is 7%, the CAPM beta is 1.3, and estimate the future required return for Firm 1 (when estimating the required return for Firm 1 going forward, assume an alpha of zero). All returns are on an annual basis. Should Firm 1 do its project?Mantap Industries has three projects under consideration. Project L is a lower-than-averagerisk project, project A is an average-risk project, and project H is a higher-than-average-riskproject. You have gathered the following information to determine if one or more of theseprojects has an acceptable rate of return for the firm.• Sources of financing 50% debt and 50% equity• Rd = 8.00% before taxes• Tax Rate = 30%• Average beta for Mantap Industries = 1.0• Rm = 13.00%• Rf = 4.00%• Adjusted WACC = 9.30%• Beta for project L = 0.80, for project A = 1.00, and for project H = 1.20• IRRL = 9.00%, IRRA = 10.00%, and IRRH = 11.00%Calculate the required rate of return for each project and determine which, if any, projects are acceptable to the firm
- The Treasury bill rate is 3%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market?b. What is the required return on an investment with a beta of 1.8? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)c. If an investment with a beta of 0.8 offers an expected return of 8.2%, does it have a positive or negative NPV?d. If the market expects a return of 12.9% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)The Treasury bill rate is 6%, and the expected return on the market portfolio is 10%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.8 offers an expected return of 9.0%, does it have a positive or negative NPV? d. If the market expects a return of 11.0% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Company "A" has a beta of 1.5 and a cost of capital of 25%. Company "B" has a beta of 0.8 and a cost of capital of 15%. When evaluated at a rate of 15%, the project shows an NPV of +$5 million, and when evaluated at a rate of 25%, the project shows an NPV of -$2 million.Should either company accept the project, and if so, under what conditions?