If the Project Beta and IRR Coordinates Plot Above the SML

question 16

Multiple Choice

If the project beta and IRR coordinates plot above the SML the project should be:

• A)accepted.
• B)rejected.
• C)It is impossible to tell.
• D)It will depend on the NPV.
• E)None of the above.

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Definitions:

Par Value

The face value of a bond or the stock value stated in the corporate charter, which may differ from the market value.

Stock Split

A corporate action where a company divides its existing shares into multiple new shares to boost the liquidity of the shares, though the overall value of the company remains unchanged.

Market Value

The existing rate at which an asset or service is being offered for buying or selling in the marketplace.

Debt-Equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by shareholder equity.