Allequityincsstockbetais12theriskfreerateis8and

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: formation for three projects being considered by an all‐equity firm called All Equity Inc. All Equity Inc's stock beta is 1.2, the risk‐free rate is 8%, and the market risk premium is 8.5%. Which of the following projects should be accepted? Project A B C Beta 0.65 0.90 1.40 IRR 12% 17% 19% 4. Tricky Instruments Inc. (TII) has a project that requires an initial investment of $190 million. TII's target D/E ratio is 0.5, flotation costs for equity are 6% and for debt are 3%. What is the true cost (in dollars) of the project when flotation costs are inc...
View Full Document

This note was uploaded on 11/30/2012 for the course HADM 2220 taught by Professor Moulton during the Fall '12 term at Cornell University (Engineering School).

Ask a homework question - tutors are online