The Treasury bill rate is 4% and the market risk premium is 7%. Project Q R Beta 0.75 1.75 S T Beta 1.0 0 2.0 0.4 1.6 a. What are the project costs of capital for new ventures with betas of 0.75 and 1.75? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Internal Rate of Return, % 14 6 18 Cost of Capital 9.25 % 16.25 % Project P Project Q Project R 7 20 b. Which of the capital investments shown above have positive (non-zero) NPV's? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Project S Project T
The Treasury bill rate is 4% and the market risk premium is 7%. Project Q R Beta 0.75 1.75 S T Beta 1.0 0 2.0 0.4 1.6 a. What are the project costs of capital for new ventures with betas of 0.75 and 1.75? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Internal Rate of Return, % 14 6 18 Cost of Capital 9.25 % 16.25 % Project P Project Q Project R 7 20 b. Which of the capital investments shown above have positive (non-zero) NPV's? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Project S Project T
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:The Treasury bill rate is 4% and the market risk premium is 7%.
Internal
Rate of
Return, %
14
6
18
Project
P
Q
R
Beta
0.75
1.75
T
Beta
1.0
0
2.0
0.4
1.6
a. What are the project costs of capital for new ventures with betas of 0.75 and 1.75? (Do not round intermediate calculations. Enter
your answers as a percent rounded to 2 decimal places.)
7
20
Cost of Capital
9.25 %
16.25 %
b. Which of the capital investments shown above have positive (non-zero) NPV's? (You may select more than one answer. Single click
the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to
empty the box for a wrong answer.)
Project P
Project Q
Project R
Project S
Project T
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