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XYZ Industries has three projects under consideration

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Question;XYZ Industries has three projects under consideration. Project L is a lower-than-average-risk project, project A is an average-risk project, and project H is a higher-than-average-risk project. You have gathered the following information to determine if one or more of these projects has an acceptable rate of return for the firm.? Sources of financing 50% debt and 50% equity? Rd = 7.00% before taxes? Tax Rate = 30%? Average beta for XYZ Industries = 1.5? Rm = 12.00%? Rf = 3.75%? Adjusted WACC = 10%? Beta for project L = 0.80, for project A = 1.00, and for project H = 1.20? IRRL = 9.00%, IRRA = 10.00%, and IRRH = 11.00%Calculate the required rate of return for each project and determine which, if any, projects are acceptable to the firm.

 

Paper#49179 | Written in 18-Jul-2015

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