To determine whether or not an investment has a positive NPV, we essentially compare the expected return on that new investment to what the financial market offers on an investment with the same beta. This is why the SML is so important; it tells us the " " for bearing risk in the economy
going rate

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09-12-2022
Business

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To determine whether or not an investment has a positive NPV, we essentially compare the expected return on that new investment to what the financial market offers on an investment with the same beta. This is why the SML is so important; it tells us the " " for bearing risk in the economy
going rate

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contexto065 contexto065 · Answer 1 · 2022-12-16T03:01:51+01:00

Going rate

The Capital Asset Pricing Model is graphically represented by the security market line. It is a graph that contrasts predicted return with beta-measured systematic risk.

The difference between the current value of cash inflows and withdrawals over a period of time is known as net present value (NPV). It is employed for measurements that are mostly used in capital budgeting, the process by which businesses decide if a new investment or expansion opportunity is worthwhile. When presented with an investment opportunity, a corporation must determine if making the investment will result in net economic gains or losses for the business. A project's NPV is positive when it charts above the SML because its IRR is higher than the needed rate of return. The NPV is negative when a project maps below the SML because its IRR is lower than the needed rate of return.

Know more about the security market line at: https://brainly.com/question/29767500

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