Required Rate of Return on the Project Assignment | Homework For You
June 8th, 2020
Blue Bottle Care operates urgent care clinics in metropolitan areas. They are evaluating the feasibility of opening a new clinic in a potentially high-volume area. The company’s analysts estimate a market ß for the proposed project of 0.86. This is slightly higher than the market ß for the company’s average investment, which is 0.79. The estimated corporate ß for the proposed project is 1.04. The expected rate of return on the equity portion of the proposed project is 8.55%. Currently, the rate of return on short-term US Treasury bills is 2.5%, and the required rate of return on the S&P 500 Index is 10.5%.
Calculate the required rate of return on the proposed project. Should Blue Bottle carry out this project? Provide a one-sentence justification for your answer.Get Finance homework help today