ne the answer to this question.) as division in two different industries - clothing and tourism. It is considering two projects, one in each industry. The following table shows the eta of firms operating wholly within those industries, along with the Internal Rate of Return of each project. The risk free rate of return is 5.8% and cted return on the market is 11.5%. Project Industry Beta IRR A Clothing 0.8 10.76% Tourism 1.4 13.38% roject(s) should the firm accept? he firm should accept 1 project only - Project A. ne firm should accept neither project. ne firm should accept both projects. ne firm should accept 1.0 project only - Project B.
ne the answer to this question.) as division in two different industries - clothing and tourism. It is considering two projects, one in each industry. The following table shows the eta of firms operating wholly within those industries, along with the Internal Rate of Return of each project. The risk free rate of return is 5.8% and cted return on the market is 11.5%. Project Industry Beta IRR A Clothing 0.8 10.76% Tourism 1.4 13.38% roject(s) should the firm accept? he firm should accept 1 project only - Project A. ne firm should accept neither project. ne firm should accept both projects. ne firm should accept 1.0 project only - Project B.
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:(Note: The following information is the same information that was provided for Question 2. You may wish to use your answer to Question 2 to help you
determine the answer to this question.)
A firm has division in two different industries - clothing and tourism. It is considering two projects, one in each industry. The following table shows the
typical beta of firms operating wholly within those industries, along with the Internal Rate of Return of each project. The risk free rate of return is 5.8% and
the expected return on the market is 11.5%.
Project
Industry
Beta
IRR
A
Clothing
0.8
10.76%
В
Tourism
1.4
13.38%
Which project(s) should the firm accept?
a. The firm should accept 1 project only - Project A.
O b. The firm should accept neither project.
O c. The firm should accept both projects.
O d. The firm should accept 1.0 project only - Project B.
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