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Which projects have a higher expected return than the firm

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Reference no: EM132894459

Another company, Happy Company is an all-equity firm and it is considering the following projects:
           
Project          Beta             Expected Return
W              0.80                 10%
X               0.90                  12%
Y               1.45                    13%
Z               1.60                  15%

The T-bill rate is 5 percent and the expected return on the market is 11 percent.

Question i. Which projects have a higher expected return than the firm's 11 percent cost of capital?

Question ii. Which projects should be accepted?

Question iii. Which projects would be incorrectly accepted or rejected if the firm's overall cost of capital were used as a hurdle rate?

Reference no: EM132894459

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