单选题 Project C is similar in risk to a company in their same industry that has an average leveraged beta of 1.2. If Conover uses a pure play method to evaluate project C, what is the appropriate cost of equity capital for the project?

A、

A. 12.2%.
B、

B. 10.3%.
C、

C. 11.2%.

【正确答案】 A

【答案解析】Project C is similar in risk to an industry that has an average beta of 1.2. Therefore, we use the capital asset pricing model and the industry average beta to calculate the cost of equity capital for Project C: Cost of Equity Capital for Project C=0.05+1.2×(0.11-0.05)=0.122.