Answered

A firm has division in two different industries - clothing and tourism. It is considering two projects, one in each industry. The following table shows the typical beta of firms operating wholly within those industries, along with the Internal Rate of Return of each project. The risk free rate of return is 5.5% and the expected return on the market is 9.2%.

Project Industry Beta IRR
A Clothing 1.0 9.7%
B Tourism 1.4 10.28%
What is the appropriate cost of capital to use as a discount rate to evaluate these projects?
a.Project A: 14.7% Project B: 10.7%
b.Project A: 9.2% Project B: 10.7%
c.Project A: 9.2% Project B: 18.4%
d.Project A: 14.7% Project B: 18.4%



Answer :

Other Questions