Beta of a project. Magellan is adding a project to the company portfolio and has the following information: the expecte...

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Beta of a project. Magellan is adding a project to the company portfolio and has the following information: the expecte...

Beta of a project. Magellan is adding a project to the company portfolio and has the following information: the expected market return is 14.0%, the risk-free rate is 3.0%, and the expected return on the new project is 18.0%.

What is the project's beta?

business finance

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Answer 1

Answer #1

As per CAPM

expected return = risk-free rate + beta * (expected return on the market - risk-free rate)

18 = 3 + Beta * (14 - 3)

Beta = 1.36

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Answer 2

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