BUSINESS 280-A firm entirely financed with equity capital
June 7th, 2024
A firm entirely financed with equity capital (i.e. no debt) and a beta equal to 1.0 is considering the following projects;ProjectBetaIRRW0.758.90%X0.910.80%Y1.1512.80%Z1.4513.90%The risk-free rate is 4% and the expected return on the market is 11%.Which projects have a higher expected return than the firm’s cost of capital?Which projects should be accepted?Which projects would be incorrectly accepted or rejected if the firm’s overall cost of capital were used as the hurdle rate?