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On-Line Text Co \bullet Project W: 14 \bullet Project X: 18 \bullet Project Y: 17

Question 62

Essay

On-line Text Co. has four new text publishing products that they must decide on publishing to expand their services. The firm's WACC has been 17%. The projects are of equal risk, ßs of 1.6. The risk-free rate is 7% and the market rate is expected to be 12%. The projects are expected to earn as follows:
\bullet Project W: 14%
\bullet Project X: 18%
\bullet Project Y: 17%
\bullet Project Z: 15%
What projects should be selected and why?

Correct Answer:

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Required Rate of Return: = 7 + 1.6(12 - ...

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