30. CAPM and Cost of Capital. Suppose the Treasury bill rate is 4% and the market risk premium is 7%. (LO12-3) a. What are the project costs of capital for new ventures with betas of .75 and 1.75? b. Which of the following capital investments have positive NPVS?

30. CAPM and Cost of Capital. Suppose the Treasury bill rate is 4% and the market risk premium is 7%. (LO12-3) a. What are the project costs of capital for new ventures with betas of .75 and 1.75? b. Which of the following capital investments have positive NPVS?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

30. CAPM and Cost of Capital. Suppose the Treasury bill rate is 4% and the market risk premium
is 7%. (LO12-3)
a. What are the project costs of capital for new ventures with betas of .75 and 1.75?
b. Which of the following capital investments have positive NPVS?
Project
Beta
Internal Rate of Return (%)
P.
1.0
14
Q
R
2.0
18
0.4
1.6
20

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