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

question 31

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 3%, and the expected market rate of return is 11%. Your company has a beta of 1.3, 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) 4.2%.
• B) 7.6%.
• C) 12.4%.
• D) 13.4%.
• E) 15.0%.

---

Definitions:

Goal Of Description

The primary purpose or intent behind describing a process, condition, concept, or object, often aimed at providing clarity, understanding, or instruction.

Scientific Method

A systematic, organized series of steps that helps in understanding phenomena, acquiring new knowledge, or correcting and integrating previous knowledge.

Third Force

A psychological perspective that focuses on humanistic, existential, and gestalt views of personality, emphasizing personal growth and self-actualization.

Humanism

A philosophical and ethical stance that emphasizes the value and agency of human beings, individually and collectively, often prioritizing human welfare and freedoms.