Outside Johnnie's Has a Beta of 1

question 193

Multiple Choice

Outside Johnnie's has a beta of 1.3 and a cost of equity of 12.3 %. The risk-free rate of return is 4.5 %. Johnnie's is considering a project with a beta of 1.4 and a project life of six years. An appropriate discount rate for the project is:

• A) 12.33 %.
• B) 12.50 %.
• C) 12.78 %.
• D) 12.90 %.
• E) 13.11 %.

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