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A project has a beta of 1.3. The risk-free return is 2% and the return on...

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Finance

A project has a beta of 1.3. The risk-free return is 2% andthe return on the market is 12%. The project has an IRR of14%.
a) If the firm’s cost of capital is 10%, will they take theproject using the cost of capital?
b) Using the CAPM to determine project risk, will they takethe project?
c) Which method is better for analyzing this project?Why?

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Transcribed Image Text

A project has a beta of 1.3. The risk-free return is 2% andthe return on the market is 12%. The project has an IRR of14%.a) If the firm’s cost of capital is 10%, will they take theproject using the cost of capital?b) Using the CAPM to determine project risk, will they takethe project?c) Which method is better for analyzing this project?Why?

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