The Spinning Politician Company is considering three mutually exclusive projects, Adscams, Boondoggles, and Closures.The following information is provided for the two projects.

All projects can be replicated.The project betas for Adscams, Boondoggles, and Closures are 1.2, 0.9, and 1.5, respectively.The risk-free rate is 4.25% and the expected return on the market is 10.5%.
a)Find the required rates of return for the three projects.
b)Find the NPVs of the three projects.
c)Which project should the company undertake? Why?

Question

The Spinning Politician Company is considering three mutually exclusive projects, Adscams, Boondoggles, and Closures.The following information is provided for the two projects.
  
All projects can be replicated.The project betas for Adscams, Boondoggles, and Closures are 1.2, 0.9, and 1.5, respectively.The risk-free rate is 4.25% and the expected return on the market is 10.5%. 
a)Find the required rates of return for the three projects.
b)Find the NPVs of the three projects.
c)Which project should the company undertake? Why?

Quizplus · Accepted Answer

The Answer of The Spinning Politician Company is considering three mutually exclusive projects, Adscams, Boondoggles, and Closures.The following information is provided for the two projects.
  
All projects can be replicated.The project betas for Adscams, Boondoggles, and Closures are 1.2, 0.9, and 1.5, respectively.The risk-free rate is 4.25% and the expected return on the market is 10.5%. 
a)Find the required rates of return for the three projects.
b)Find the NPVs of the three projects.
c)Which project should the company undertake? Why?

The Spinning Politician Company Is Considering Three Mutually Exclusive Projects