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%.

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%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 2P

See similar textbooks

Similar questions

Consider a decision maker who is comfortable with an investment decision that has a 50% chance of earning $25,000 and a 50% chance of losing $12,500, but not with any larger investments that have the same relative payoffs. Write the equation for the exponential function that approximates this decision maker’s utility function. Plot the exponential utility function for this decision maker for x values between –20,000 and 35,000. Is this decision maker risk-seeking, risk-neutral, or risk-averse? Suppose the decision maker decides that she would actually be willing to make an investment that has a 50% chance of earning $30,000 and a 50% chance of losing $15,000. Plot the exponential function that approximates this utility function and compare it to the utility function from part (b). Is the decision maker becoming more risk-seeking or more risk-averse?
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/N
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 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 1.90? (Do not round intermediate calculations. Enter your answer as a whole percent.) d. If the project's beta is 1.90, should the project be accepted?
A 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?
The risk free rate is 8 % and the expected return on the market portfolio is 16 %. A firm is considering a project with an estimated beta of 1.3. What is the required rate of return on the project? If the IRR is of the project is 19 %, what is the project alpha?
An analyst has modeled the stock of Crisp Trucking using a two-factor APTmodel. The risk-free rate is 6%, the expected return on the first factor (r1) is12%, and the expected return on the second factor (r2) is 8%. If bi1 5= 0.7 andbi2 5= 0.9, what is Crisp’s required return?
What is the required return on an investment with a beta of 1.3 if the riskfreerate is 2.0 percent and the return on the market is 8.1 percent? If the expected return on the investment is 11.2 percent, what should you do?
As the CFO of Yo co., you are considering three projects with different levels of risks. You estimate that its below-average risk projects have a WACC of 7%, its average-risk projects have a WACC of 10%, and its above-average risk projects have a WACC of 13%. Which of the following projects should you accept? a. Project A, which is of below-average risk and has a return of 8%. B. Project B, which is of average risk and has a return of 9.5%. C.Project C, which is of above-average risk and has a return of 12%. D. None of the projects should be accepted. E. All of the projects should be accepted.
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% 1.6
An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1 = 0.7 and bi2 = 0.9, what is Crisp’s required return?
The return on the market is 10.5% and the risk-free rate is 2.90%. The investor is conservativeand his beta (β) is 0.75.a) What is the required rate of return for this investment using the CAPM approach?b) What if the (β) is 1.75, but the risk-free rate is 5% and the market return is 10.5%? What is the required rate of return for this investment? Please do it in excel and show the formulas.