As a Financial Analyst, You Are Tasked with Evaluating a Capital-Budgeting

question 55

Multiple Choice

As a financial analyst, you are tasked with evaluating a capital-budgeting project.You were instructed to use the IRR method, and you need to determine an appropriate hurdle rate.The risk-free rate is 4%, and the expected market rate of return is 11%.Your company has a beta of 0.67, and the project that you are evaluating is considered to have risk equal to the average project that the company has accepted in the past.According to CAPM, the appropriate hurdle rate would be

• A)4%.
• B)8.69%.
• C)15%.
• D)11%.

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Definitions:

Performance

The act of carrying out or accomplishing an action, task, or function.

Causal Factors

Elements or conditions that bring about an effect or contribute to producing a result.

Experimental Method

A research methodology that systematically manipulates one or more variables to determine their effects on other variables, typically used to establish cause-and-effect relationships.

Variables

Elements or factors that can change and affect the outcome of an experiment or study.