A Project Has an Internal Rate of Return of 11

question 32

Multiple Choice

A project has an internal rate of return of 11.76 percent.The company beta is 1.22,and the pure play beta is 1.14.The market rate of return is 11.8 percent,the tax rate is 35 percent,and the risk-free rate is 3.3 percent.Should this project be accepted according to the CAPM if the firm is all-equity financed? Why or why not?

• A)No,the CAPM rate is 13.36 percent.
• B)Yes,the CAPM rate is 12.99 percent.
• C)No,the CAPM rate is 11.96 percent.
• D)No,the CAPM rate is 12.99 percent.
• E)Yes,the CAPM rate is 13.36 percent.

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Definitions:

DSS

Stands for Decision Support System, a computer-based information system that supports business or organizational decision-making activities.

TPS

A Transaction Processing System is an information system designed to gather, store, alter, and recover an organization's transaction data.

PLM

Product Lifecycle Management, a systematic approach to managing the series of changes a product goes through, from its design and development to its ultimate disposal.

CIM

Computer-Integrated Manufacturing, an approach to manufacturing that involves the use of computers to control the entire production process, from design and manufacturing to product delivery.