An All-Equity Firm Is Considering the Projects Shown as Follows

question 113

Multiple Choice

An all-equity firm is considering the projects shown as follows.The T-bill rate is 3 percent and the market risk premium is 6 percent.If the firm uses its current WACC of 12 percent to evaluate these projects,which project(s) ,if any,will be incorrectly rejected?

• A)Only Project A would be incorrectly rejected.
• B)Both Projects A and C would be incorrectly rejected.
• C)Projects A, B, and C would be incorrectly rejected.
• D)None of the projects would be incorrectly rejecteD.Step 1: Find Project Required Returns using CAPM.Project A: 7.8 percent; Project B: 10.2 percent; Project C: 11.4 percent; Project D: 12 percent; only Project A would be incorrectly rejected since its required return is only 7.8 percent given its risk and it is expected to return 9 percent.

---

Definitions:

Call Girl

A sex worker who provides services to clients, often after being contacted by telephone or the internet, as opposed to working in public places.

Sex Worker

An individual who engages in sexual activities in exchange for money or other forms of payment.

Sexual Services

Activities that involve providing sexual pleasure in exchange for compensation.

Sexually Explicit

Content or material that openly and directly expresses or deals with sex and sexual activities.