An all-equity firm is considering the following projects:
Project Beta IRR
W .59 8.9 %
X .86 9.6
Y 1.14 12.0
Z 1.46 15.1
The T-bill rate is 4.1 percent, and the expected return on the market is 11.1 percent.
a. Compared with the firm's 11.1 percent cost of capital, Project W has a expected return, Project X has a expected return, Project Y has a expected return, and Project Z has a expected return.
b. Project W should be , Project X should be , Project Y should be , and Project Z should be .
c. If the firm's overall cost of capital were used as a hurdle rate, Project W would be , Project X would be , Project Y would be , and Project Z would be.