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  3. if a firm's cost of capital is 15% and a large div

If a firm's cost of capital is 15% and a large divisions cost of capital...

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Finance

  1. If a firm's cost of capital is 15% and a large divisions cost of capital is 10%, then discounting the divisions cash flows at 15% would?

    1. Determine where the project plots in relation to the security market line

    2. Make the project look more attractive than it should be

    3. Be correct from a theoretical perspective

    4. Be incorrect and could cause the project to be erroneously rejected

  2. If the market portfolio (S&P 500) is expected to return 15%, then a portfolio that is expected to return 12%?

    1. Plots above the security market line

    2. Plots to the right of the market on an SML graph

    3. Is not diversified

    4. Has a beta that is less than 1.0

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