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

question 92

Multiple Choice

An all-equity firm is considering the projects shown as follows.
$$\begin{array} { c c c } \text { Project } & \text { Expected Return } & \text { Beta } \\\text { A } & 7.0 \% & 0.25 \\\text { B } & 17.0 \% & 1.3 \\\text { C } & 12.0 \% & 1.6 \\\text { D } & 10.0 \% & 2.1\end{array}$$
The T-bill rate is 4 percent and the market risk premium is 9 percent. If the firm uses its current WACC of 14 percent to evaluate these projects, which project(s) will be incorrectly rejected?

• A) Project A
• B) Project B
• C) Project C
• D) Project D

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Definitions:

Translation Statement

A financial statement that converts the financial results of a company's foreign operations to its reporting currency.

Issued Capital

Represents the total value of a company’s shares that have been issued to shareholders.

Translation of Financial Statements

The process of converting the financial statements of a company into another currency, often necessary for consolidation purposes or for financial reporting in companies that operate in multiple countries.

Foreign Operations

Business activities or entities that a company conducts or owns in countries other than where its main operations are located.