On-Line Text Co

question 18

Essay

On-line Text Co.has four new text publishing products that it is considering.The projects are of equal risk with a beta of 1.6.The risk-free rate is 4.2 percent and the market rate is expected to be 12.3 percent.The projects and their expected internal rates of return are: W = 14.4 percent; X = 18 percent,Y = 16.4 percent; and Z = 17.2 percent.Which projects should be accepted? Justify your acceptance decision.

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Definitions:

Gini Coefficient

A measure of income inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality).

Purchasing Power Parity

Purchasing Power Parity is an economic theory that compares different countries' currencies through a "basket of goods" approach, suggesting that exchange rates should adjust so that identical goods cost the same in different countries.

Market-based Economy

An economic system where decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand.

Personal Wealth

The total value of all financial and non-financial assets owned by an individual minus any outstanding liabilities.