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Author Question: Nelson Enterprises, an all-equity firm, has a beta of 2.5. Nelsons chief financial officer is ... (Read 106 times)

danitzaidaly

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on: Aug 7, 2023
Nelson Enterprises, an all-equity firm, has a beta of 2.5. Nelson’s chief financial officer is evaluating a project with an expected return of 27% before any risk adjustment. The risk-free rate is 6%, and the market risk premium is 8%. The project being evaluated is riskier than Nelson’s average project, in terms of both its beta risk and its total risk. Which of the following statements is correct?

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The accept/reject decision depends on the firm’s risk-adjustment policy. If Nelson’s policy is to increase the required return on a riskier-than-average project to 4% over rs, then it should reject the project.


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The project should definitely be rejected because its expected return (before risk adjustments) is less than its required return.


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Riskier-than-average projects should have their expected returns increased to reflect their higher risk. Clearly, this would make the project acceptable regardless of the amount of the adjustment.


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The project should definitely be accepted because its expected return (before any risk adjustments) is greater than its required return.

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Marked as best answer by danitzaidaly on Aug 7, 2023

Burly

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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danitzaidaly

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Reply 2 on: Aug 7, 2023
Gracias!

Liamb2179

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Reply 3 on: Yesterday
Excellent

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