If the project beta and IRR coordinates plot above the SML the project should be:
A)accepted.
B)rejected.
C)It is impossible to tell.
D)It will depend on the NPV.
E)None of the above.

Question

Quizplus · Accepted Answer

If the project beta and IRR coordinates plot above the SML (Security Market Line), it means that the project's expected return is higher than its required return based on the market risk. Therefore, the project is generating excess returns or alpha. Hence, the project should be accepted as it is creating value for investors, and its returns are higher than the cost of capital.

If the Project Beta and IRR Coordinates Plot Above the SML