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You have forecast the cash flows on a project with a beta of 1.3 and calculated that its internal rate of return is 12 percent.
You have forecast the cash flows on a project with a beta of 1.3 and calculated that its internal rate of return is 12 percent. Suppose that Treasury bills offer a return of 4 percent and the expected market risk premium is 7 percent. Which of the following statements is correct?
Accept the project because its return lies below the security market line
Accept the project because its return lies above the security market line
There is not enough information to know whether to accept or reject the project
Reject the project because its return lies below the security market line
Reject the project because its return lies above the security market line
