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QUESTION
Polycorp is investigating two projects. The risk free rate is .06 and the market premium is 0.06. Project
Polycorp is investigating two projects. The risk free rate is .06 and the market premium is 0.06. Project
A has a beta of .75 and Project B has a beta 1.6 times that of the average for the firm's existing projects. Projects A and B are independent. If accepted the projects will initially be funded by borrowing at 7%pa. Calculate the beta of project B to two decimal places. The firm's current weighted average cost of capital is 11% pa (before taking either or both A and B). Assume no taxes.
