You are the manager of a firm and have to decide whether or not to undertake thefollowing project. The project costs $1000 now and yields a risky cash flow withexpected value $1100 in one year. The project has the same risk as your currentprojects, i.e., the beta is the same as the company’s current beta.The expected market return is 7% and the risk-free rate is 3%.What is the maximal beta of your company that would justify undertaking the project?(Answer with two decimals, e.g. 0.75)

You are the manager of a firm and have to decide whether or not to undertake thefollowing project. The project costs $1000 now and yields a risky cash flow withexpected value $1100 in one year. The project has the same risk as your currentprojects, i.e., the beta is the same as the company’s current beta.The expected market return is 7% and the risk-free rate is 3%.What is the maximal beta of your company that would justify undertaking the project?(Answer with two decimals, e.g. 0.75)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 6P

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