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Project 11 I I IT 1 Expected return (%) Security market line Beta 1. Should this project be accepted? Why? 2. What does this

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Answer #1

1. Yes, the project should be accepted because, it is above the security market line (SML)

Meaning, for the same level of risk, the project is delivering an additional 1 percentage point expected return.

2. This implies that the NPV of the project is positive.

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