As a Financial Analyst,you Are Tasked with Evaluating a Capital

question 141

Multiple Choice

As a financial analyst,you are tasked with evaluating a capital budgeting project.You were instructed to use the IRR method and you need to determine an appropriate hurdle rate.The risk-free rate is 4 percent and the expected market rate of return is 11 percent.Your company has a beta of 1.0 and the project that you are evaluating is considered to have risk equal to the average project that the company has accepted in the past.According to CAPM,the appropriate hurdle rate would be ______%.

• A)4
• B)7
• C)15
• D)11
• E)1

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Definitions:

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The production of electricity by applying pressure to a crystal.

Pressure

The force applied perpendicular to the surface of an object per unit area over which that force is distributed.

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Individuals who interpret the Constitution in a literal and narrow way, often limiting the powers of the federal government.

General Welfare

A clause in the Constitution that allows Congress to pass laws deemed necessary and proper for the health and well-being of the American populace.