A particular fi rm’s shareholders demand a 15 percent return on their investment, given the fi rm’s risk. However, this fi rm has historically generated returns in excess of shareholder expectations,...

A particular fi rm’s shareholders demand a 15 percent return on their investment, given the fi rm’s risk. However, this fi rm has historically generated returns in excess of shareholder expectations, with an average return on its portfolio of investments of 25 percent. a. Looking back, what kind of stock-price performance would you expect to see for this fi rm? b. A new investment opportunity arises, and the fi rm’s fi nancial analysts estimate that the project’s return will be 18 percent. The CEO wants to reject the project because it would lower the fi rm’s average return and therefore lower the fi rm’s stock price. How do you respond?