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.
Correct Answer:
Verified
Q63: JJ's Ice Cream has 1,800 bonds outstanding
Q64: Zee's Toy Store needs $242,000 for expansion.The
Q65: Leo's Cars has a beta of 1.1
Q66: A firm has net income of $21,350,depreciation
Q67: CTO Transport has an aftertax cost of
Q69: Taylor's has a beta of 0.97 and
Q70: Green Roof Foods currently has a debt-to-equity
Q71: A levered firm has a target capital
Q72: A firm has an EBIT of $41,300,depreciation
Q73: The Bird Carver has a target WACC
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents