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

question 42

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 5%, and
The expected market rate of return is 10%. Your company has a beta of 0.67, 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) 10%.
• B) 5%.
• C) 8.35%.
• D) 28.35%.
• E) 0.67%.

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Definitions:

Effective Control

The process of ensuring that organizational activities are proceeding as planned and correcting any significant deviations.

Measurement of Results

The process of quantitatively and qualitatively assessing the outcomes of an action or event, to determine the extent to which objectives and goals have been achieved.

Market Controls

Mechanisms that regulate the behavior and operation of market participants, typically through laws and regulations.

Keeping Up

The act of staying informed or current with developments, trends, or advancements in a particular field or area.