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

question 52

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 0.75, 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) 9.25%.
• C) 15%.
• D) 11%.
• E) 0.75%.

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Definitions:

Aerosols

Very small solid particles or drops of liquid dispersed in the atmosphere.

Fissure Eruptions

A volcanic eruption characterized by the release of lava from long cracks or fissures in the Earth's surface, typically resulting in the formation of extensive lava flows.

Lava Fountains

High-speed bursts of molten rock that are ejected from a volcano or vent.

Volcanic Blocks

Large chunks of solid rock ejected from a volcano during an eruption, distinct from smaller pyroclastic materials.