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If the expansion is expected to produce an internal rate of

The Nelson Hotel Corporation is planning a major expansion. Nelson is financed 100 percent with equity and intends to maintain this capital structure after the expansion. Nelson's beta is 0.9. The expected market return is 16% and the risk-free rate is 10%.

If the expansion is expected to produce an internal rate of return of 17%, should Nelson make the investment?

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Finance Basics: If the expansion is expected to produce an internal rate of

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