Serenity Parts is considering a new project. They believe that the project has a beta of 2.00. The T-bill rate is 1.50% (risk-free rate) and the S&P 500 return (which represents "market") is 12.00%. What is the appropriate return on the new project? O 25.50% O 12.00% O 26.25% O 24.00%

Serenity Parts is considering a new project. They believe that the project has a beta of 2.00. The T-bill rate is 1.50% (risk-free rate) and the S&P 500 return (which represents "market") is 12.00%. What is the appropriate return on the new project? O 25.50% O 12.00% O 26.25% O 24.00%

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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Concept explainers

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.

Question

Serenity Parts is considering a new project. They believe that the
project has a beta of 2.00. The T-bill rate is 1.50% (risk-free rate) and
the S&P 500 return (which represents “market") is 12.00%. What is
the appropriate return on the new project?
25.50%
12.00%
26.25%
24.00%
22.50%

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