A Project Is Determined to Have Equal Probability of Generating

question 68

Multiple Choice

A project is determined to have equal probability of generating $1 million annually or $500,000 annually for 4 years.The initial outlay is $2 million.The expected return on Treasury bills is 6% and the market risk premium is 10%.What is the highest project beta that will justify acceptance of the project?

• A) 0.245
• B) 1.000
• C) 1.245
• D) 2.310

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Definitions:

Hostile Takeover

An acquisition attempt by a company or individual against the wishes of the target company's management and board of directors.

Amalgamation

The merger or consolidation of two or more companies into a new entity, combining their assets, liabilities, and operations.

Consolidation

A merger in which a new firm is created and both the acquired and acquiring firm cease to exist.

Merger

The combination of two or more companies into one, where one company survives and the others cease to exist, aiming to increase market share and efficiency.