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

question 79

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 5%, and the expected market rate of return is 10%. 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) 10%.
• B) 5%.
• C) 8.35%.
• D) 28.35%.
• E) 0.67%.

---

Definitions:

Predefined Behaviors

Specific actions or reactions that are established in advance to guide responses in particular situations or under certain conditions.

Standard Hour Plan

An incentive plan that pays workers extra for work done in less than a preset "standard time."

Merit Pay

A pay system where employees are compensated based on their performance, as determined through evaluations, with the aim of rewarding high performance.

Individual Performance

The measure of the level to which an employee accomplishes work tasks effectively and efficiently, contributing to the organization's objectives.