An All-Equity Firm Is Considering the Projects Shown as Follows

Multiple Choice

An all-equity firm is considering the projects shown as follows.The T-bill rate is 3 percent and the market risk premium is 6 percent.If the firm uses its current WACC of 12 percent to evaluate these projects,which project(s) ,if any,will be incorrectly rejected?

A) Only Project A would be incorrectly rejected.
B) Both Projects A and C would be incorrectly rejected.
C) Projects A, B, and C would be incorrectly rejected.
D) None of the projects would be incorrectly rejecteD.Step 1: Find Project Required Returns using CAPM.Project A: 7.8 percent; Project B: 10.2 percent; Project C: 11.4 percent; Project D: 12 percent; only Project A would be incorrectly rejected since its required return is only 7.8 percent given its risk and it is expected to return 9 percent.