A Company Is Evaluating a Capital Project on a New

question 70

Multiple Choice

A company is evaluating a capital project on a new line of business for the firm. The firm's current cost of capital is 12%. However, another firm, whose principal focus is in the same field, is publicly traded and has a beta of 1.6. The market is currently yielding 12% and the yield on short-term treasury bills is 6%. The risk adjusted rate that should be used for this project is:

• A)12%.
• B)18%.
• C)25.2%.
• D)15.6%.

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