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.
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