Clear Contacts is evaluating the following independent projects IRR Risk Project CD 15.0% Hgh Average GH 13.0 RS 10.5 Low Clear's policy is to adjust its average required rate of return, which equats 12 percent, when the risk associoted with a project le determined to be either higher-than average or lower-than-average. The adjustment for higherthan-average risk projects is 4 percent and the adjustment for lower-than-average nsk projects is 2 percent Which projectts) should Ciear purchase? O Projects CD and CH shouid be puchased, becase they both have Ms greater than 12 percen. O Pojects GH and RS should be purchased O Orly Project Co sould be purchased, becane han the highest MR ONone of the projects should be perchused. O Only Project RS sheuld be purchased.
Clear Contacts is evaluating the following independent projects IRR Risk Project CD 15.0% Hgh Average GH 13.0 RS 10.5 Low Clear's policy is to adjust its average required rate of return, which equats 12 percent, when the risk associoted with a project le determined to be either higher-than average or lower-than-average. The adjustment for higherthan-average risk projects is 4 percent and the adjustment for lower-than-average nsk projects is 2 percent Which projectts) should Ciear purchase? O Projects CD and CH shouid be puchased, becase they both have Ms greater than 12 percen. O Pojects GH and RS should be purchased O Orly Project Co sould be purchased, becane han the highest MR ONone of the projects should be perchused. O Only Project RS sheuld be purchased.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Clear Contacts is evaluating the following Independernt projects
Project
IRR
Risk
CD
15.0%
High
Average
Low
GH
13.0
RS
10.5
Clear's policy is to adjust its average required rate of returm, which equals 12 percent, when the risk associeted with a project is determined to be either higher-than-
average or lower-than-average. The adjustment for higher-than-average risk projects is 4 percent and the ad ustment for lower-than-average nsk projects is 2 percent
Which projectis) should Ciear purchase?
O Projects CD and CH shouid be pchased, because they both have RRs greater than 12 percen.
O Pojects GH and RS should be purchased
O Only Preject Co should be purchased, becase has the highest RR
O None of the perojects should be perchased.
O Only Project RS should be purchased.
Greater Good Glass (GGG) plans to issue a new bond with a coupon rate of interest equal to the yield to matunity (YTM) on its existing bond. The existing bond, which
was issued five years ago, has a coupon rate of interest equal to 7.0 percent, 15 years remaining until maturity, and a face value equal to $1.000. Interest is paid
semiannually. The market value of the existing bond is $1,335.95. What is GGG's before-tax cost of debt, ra? GGG's marginal tax rate is 35 percent
O 7.96%
O 4.00%
O 485%
O 298%
O 2.00%
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