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

question 24

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 12%. Your company has a beta of 1.6, 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) 16.8%.
• B) 12.7%.
• C) 11.5%.
• D) 8.4%.
• E) 5.4%.

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Definitions:

\(k + 8\)

An algebraic expression representing the sum of a variable, \(k\), and the number 8.

\(d = \frac { 3 } { 7 }\)

Represents a specific value of the variable d, which is equal to the fraction three-sevenths.

\(d = 4\)

An equation representing that the value of the variable \(d\) is equal to 4.

\(a _ { 1 }\)

Often represents the first term in a sequence or series in mathematics, particularly in formulas involving arithmetic or geometric sequences.