A project costs $3 million,and is expected to generate $1 million in cash flows for the next 4.If the opportunity cost of capital is 15%,the project's return would plot:
A) above the security market line.
B) below the security market line.
C) on the security market line.
D) on the security market line, with a beta of 1.0.

Question

Quizplus · Accepted Answer

The project's IRR = 12.6%. Therefore, the return on the project will plot below the SML.

A Project Costs $3 Million,and Is Expected to Generate $1