Table 11.9 Tangshan Mining Company Is Considering Investment in One of Two

question 73

Multiple Choice

Table 11.9
Tangshan Mining Company is considering investment in one of two mutually exclusive projects M and N which are described below. Tangshan Mining's overall cost of capital is 15 percent, the market return is 15 percent and the risk-free rate is 5 percent. Tangshan estimates that the beta for project M is 1.20 and the beta for project N is 1.40.
-Using the risk-adjusted discount rate method of project evaluation, the better investment for Tangshan Mining is (See Table 11.9)

• A) Project M.
• B) Project N.
• C) They are equivalent.
• D) none of the above.

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Definitions:

Strategic Plan

A systematic process of envisioning a desired future, and translating this vision into broadly defined goals or objectives and a sequence of steps to achieve them.

Conduct Research

The systematic investigation into and study of materials, sources, or subjects in order to establish facts and reach new conclusions.

Implementation

The process of putting plans, policies, or strategies into action to achieve predetermined goals.

Measure Progress

The process of evaluating the advancement and effectiveness of an activity or initiative against predefined benchmarks or goals.