Wilson's Is Reviewing a Project with an Internal Rate of Return

question 50

Multiple Choice

Wilson's is reviewing a project with an internal rate of return of 13.09 percent and a beta of 1.42.The market risk premium is 8.1 percent,the tax rate is 35 percent,and the risk-free rate is 2.9 percent.The firm's WACC is 12.68 percent.Will the project be accepted if the WACC is used as the discount rate for the project? Should the project be accepted according to the CAPM,and why or why not?

• A)Yes;No,since the CAPM return of 14.40 percent exceeds the IRR.
• B)Yes;Yes,since the project plots above the security market line.
• C)Yes;Yes,since the CAPM of 10.28 percent is less than the IRR.
• D)No;Yes,since the project plots above the security market line.
• E)No;No,since the project plots below the security market line.

---

Definitions:

General Audience

A broad, unspecified group of people targeted by content that is intended to be suitable for all ages and backgrounds.

Abbreviations Correctly

The practice of shortening words or phrases correctly according to established conventions and rules.

M.D.

An abbreviation for Doctor of Medicine, a professional degree for physicians and surgeons.

Spell Out

To explain something in very clear terms with no ambiguity or to write or display something in its entirety.