PPT Slide

• Beta = 1.2, so project has more market risk than average.

• Project’s required return on equity:

  • keP = kRF + (kM - kRF)bP
    = 10% + (6%)1.2 = 17.2%.
  • kP = wdkd(1 - T) + weke
    = 0.5(12%)(0.6) + 0.5(17.2%)
    = 12.2%.

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