Homework Answers
Risk adjusted cost of capital=risk free+beta*(market-risk free)
Project I=3%+1.5*(15%-3%)=21%
Project II=3%+0.7*(15%-3%)=11.4%
Project III=3%+1*(15%-3%)=15%
Project IV=3%+1.2*(15%-3%)=17.4%
Accept all projects whose IRR is more than the risk adjusted cost of capital
Hence, Accept Project II, III and IV
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