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Wilson's Is Reviewing a Project with an Internal Rate of Return

Question 68

Multiple Choice

Wilson's is reviewing a project with an internal rate of return of 13.09 percent and a beta of 1.42.The market risk premium is 8.1 percent,the tax rate is 35 percent,and the risk-free rate is 2.9 percent.The firm's WACC is 12.68 percent.Will the project be accepted if the WACC is used as the discount rate for the project? Should the project be accepted according to the CAPM,and why or why not?


A) Yes;No,since the CAPM return of 14.40 percent exceeds the IRR.
B) Yes;Yes,since the project plots above the security market line.
C) Yes;Yes,since the CAPM of 10.28 percent is less than the IRR.
D) No;Yes,since the project plots above the security market line.
E) No;No,since the project plots below the security market line.

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