Silo Mills Has a Beta of 0

question 11

Multiple Choice

Silo Mills has a beta of 0.95 and a cost of equity of 11.9 percent.The risk-free rate of return is 2.8 percent.The firm is currently considering a project that has a beta of 1.03 and a project life of 6 years.What discount rate should be assigned to this project?

• A)13.33 percent.
• B)12.67 percent.
• C)13.62 percent.
• D)13.84 percent.
• E)14.09 percent.

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Definitions:

Auction Fever

Auction fever describes the emotional excitability and competitive bidding that can lead individuals to pay more for items in auctions than they are worth or had intended to spend.

Satisficing

A decision-making strategy that aims for an acceptable or satisfactory solution, rather than the optimal one.

Overconfidence

A cognitive bias where an individual's subjective confidence in their judgments is greater than their objective accuracy.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated as the net gain from an investment relative to its cost.