You are the CFO for an all-equity type of firm that is considering the following projects: - 11496

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You are the CFO for an all-equity type of firm that is considering the following projects:

Project W: Beta = .70, Return  = 11%

Project X: Beta = .95, Return  = 13%

Project Y: Beta = 1.05, Return  = 14%

Project Z: Beta = 1.60, Return  = 15%

The T-bill rate equals 5% and the market expected rate of return equals 12%. Which projects should be accepted?

a. X, Y, and Z 

b. W, X, and Y

c. W, Y, and Z

d. W, Y, and Z

e. None of these

 
Solution Description

You are the CFO for an all-equity type of firm that is considering the following projects:  

Project W: Beta = .70, Return  = 11%

Project X: Beta = .95, Return  = 13%

Project Y: Beta = 1.05, Return  = 14%