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    Finance - Beta Problem

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    XYZ has an asset beta of 1 and a cost of capital of 15%. A new project is being explored with a beta of .2 and an IRR of 10%. Inserting the projects beta into the CAPM reveals a return of 5% based on project risk. Should the firm accept or reject the project? Explain.

    © BrainMass Inc. brainmass.com June 4, 2020, 3:27 am ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/beta-problem-accepting-rejecting-project-515807

    Solution Preview

    The firm should accept the project. While selecting project, we need to consider the riskiness of the project. If ...

    Solution Summary

    Provides steps necessary to determine whether to accept or reject the project provided.

    $2.19

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