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

question 11

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 0.75, 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) 9.25%.
• C) 15%.
• D) 11%.
• E) 0.75%.

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Definitions:

Probability Samples

Samples chosen in such a way that every member of the population has a known, non-zero chance of being included.

Convenience Sampling

A sampling technique where subjects are selected because of their convenient accessibility and proximity to the researcher.

Sampling Distribution

The likelihood distribution associated with a specific statistic derived from a random sample.

Normal Distribution

A type of continuous probability distribution for a real-valued random variable that is symmetrically bell-shaped, centered around its mean.