An All-Equity Firm Is Considering the Projects Shown as Follows

question 60

Multiple Choice

An all-equity firm is considering the projects shown as follows. The T-bill rate is 3 percent and the market risk premium is 6 percent. If the firm uses its current WACC of 12 percent to evaluate these projects, which project(s) , if any, will be incorrectly rejected?
$$\begin{array} { c c } \text { Project } & \text { Expected Return } & \text { Beta } \\\mathrm { A } & 9.0 \% &0.8\\\mathrm {~B} & 20.0 \% &1.2\\\mathrm { C } & 13.0 \% &1.4\\\mathrm { D } & 17.0 \%&1.5\end{array}$$

• A) Only Project A would be incorrectly rejected.
• B) Both Projects A and C would be incorrectly rejected.
• C) Projects A, B, and C would be incorrectly rejected.
• D) None of the projects would be incorrectly rejected.

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