A project has a market beta of 1.4. The risk-free rate is 5%, and the equity premium is 7.6%. Your firm should undertake this project only if it returns

Question

Quizplus · Accepted Answer

The required rate of return for the project can be calculated as follows:
Required rate of return = risk-free rate + (market beta x equity premium)
= 5% + (1.4 x 7.6%) 
= 15.64%
Therefore, the project should only be undertaken if it can return at least 15.64%. Option A is the only choice that meets this requirement.

A Project Has a Market Beta of 1