Required expected return for Biopharma according to the CAPM

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Biopharma is a pharmaceutical company. Biopharma’s annual stock returns have a CAPM beta of 1.25 (i.e. β =1.25). The market portfolio’s return is 13%, and the riskfree rate is 5%. a. What is the required expected return for Biopharma according to the CAPM? b. The firm has the opportunity to develop a new drug. This project requires initial outlay of $400,000 and will bring expected revenue of $100,000 in each of the next 6 years. The riskiness of this project is the same as the overall riskiness of Biopharma. Should the management team of Biopharma approve the project or not and why?

Reference no: EM13873940

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Required expected return for Biopharma according to the CAPM : Biopharma is a pharmaceutical company. Biopharma’s annual stock returns have a CAPM beta of 1.25 (i.e. β =1.25). The market portfolio’s return is 13%, and the riskfree rate is 5%. a. What is the required expected return for Biopharma according to the..

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