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CAPM and Hurdle Rates

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A project under consideration has an internal rate of return of 14 percent and a beta of .6. The risk-free rate is 4 percent, and the expected rate of return on the market portfolio is 14 percent. Should the project be accepted? Should the project be accepted if its beta is 1.6? Why does the answer change?

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Answer:

Given that,
IRR =14%
Beta, b=0.6
Risk free rate, Rf=4%
Market ...

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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