Consider the following information regarding Project Alpha and Project Gamma: 
a. What is the expected return on Project Alpha?
b. What is the expected return on Project Gamma?
c. If the relevant risk-free rate is 3.5% and the expected return on the market is 11%,
what is the CAPM expected return on Project Alpha if its estimated beta is 0.5?
d. Using the same assumptions as in part (c), what is the CAPM expected return on
Project Gamma if its estimated beta is 0.8?
e. Based on your previous calculations, in which project would you recommend your
firm invest? Why?
Correct Answer:
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b. c. CAPM expected return on Alpha...View Answer
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