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Rate of return

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The ABC Co. has no debt in its capital structure, a beta of 0.8, and raises all funds through sale of common stock. The current market rate for similar stock is 14% and the risk-free rate is 6%. The firm is considering a project with a return of 12.9%. Should it accept the project, and if so why (Show all work).

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Solution Summary

This shows how to determine whether or not a firm should accept a project with a given rate of return.

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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