An all-equity firm is considering the projects shown below. The T-bill rate is 3

Question

An all-equity firm is considering the projects shown below. The T-bill rate is 3 percent and the market risk premium is 9 percent.

PROJECT EXPECTED RETURN BETA
A 10 % 0.7
B 22 1.4
C 16 1.6
D 21 1.8

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Calculate the project-specific benchmarks for each project. (Round your answers to 2 decimal places.)

Project A %

Project B %

Project C %

Project D %
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If the firm uses its current WACC of 15 percent to evaluate these projects, which project, will be incorrectly rejected?

Explanation / Answer

Project A =3%+0.7*9% =9.3% Project B % =3%+1.4*9% =15.6% Project C =3%+1.6*9% =17.4% Project D =3%+1.8*9% =19.2%

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