A project under consideration has an internal rate of return of 13% and a beta o

Question

A project under consideration has an internal rate of return of 13% and a beta of 0.6. The risk-free rate is 8%, and the expected rate of return on the market portfolio is 13%. a-1. Calculate the required return.   Required return %   a-2. Should the project be accepted? Yes No b-1. Calculate the required return if its beta is 1.6.   Required return %   b-2. Should the project be accepted? Yes No A project under consideration has an internal rate of return of 13% and a beta of 0.6. The risk-free rate is 8%, and the expected rate of return on the market portfolio is 13%.

Explanation / Answer

a. 0.08+ 0.6 (0.13 - 0.08)

= 0.11 or 11%

b.accept the project, because the real income is higher than expected one.

c. if the beta value is 1.6, then

= 0.08+ 1.6 (0.13 - 0.08)

= 0.16 or 16%

d. Accept the project

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.