Company X has two mutually exclusive projects. Project 1 has an IRR of 5% and a Beta equal to 1/2. Project 2 has an IRR of 20% and Beta equal to 2. Assume that the risk-free rate is zero, the market risk premium is 10%, the projects are 100%equity financed and the CAPM holds. Then, A. Project 1 is better than project 2 B. Project 2 is better than project 1 C. The company should be indifferent between the two projects D. If the company’s Beta is less than 2, then project 2 is preferable

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.