As a Financial Analyst, You Are Tasked with Evaluating a Capital-Budgeting

question 17

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%, and the
Expected market rate of return is 11%. 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:

Entrepreneur

An individual who initiates, organizes, and manages a business venture, taking on financial risks in the hope of profit.

Resource Allocator

A role or function responsible for distributing resources, such as time, money, or materials, to various projects or departments.

Monitor

A device used for observing, checking, or keeping a continuous record of a process or quantity.

Effectiveness

The degree to which something is successful in producing a desired result; the ability to achieve specified goals.