I need to determine which combination of projects is most advantageous.
Project      Beta Co-efficient
A            2.67
B            2.33
C            3.33
D            3.00
E            3.00

I would like you to show all steps in the subsequent calculations. 
Specifically which project combination is better: Project A,D &E or
Project B,C & E?

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Request for Question Clarification by answerguru-ga on 13 Mar 2004 07:36 PST

Hello dana3,

Your definition of "advantageous" is not clear - since the beta
coefficient measures profitability relative to a larger market the
best choice is relative to a few things:

1. The investors attitude (risk averse, risk loving, risk neutral)
2. The investment required for each project (if not given they are all
assumed to be the same)
3. The best information/guess on the movement of the market over the
period of these projects.

Once we have all these the decision you are looking for is fairly
straight forward. If you do not have a good response for (3) you can
use the attitude from (1) to extrapolate a guess.

Please let me know if you would like me to discuss this further in
general or if you have specific conditions you can provide so I can
answer the question at hand.

Thanks,
answerguru-ga

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Clarification of Question by dana3-ga on 13 Mar 2004 12:35 PST

All four projects are above the IRR of 16%.  The company has ample
cash flows and funds for investment.  One point of view, is that all
projects should be accepted.  However, another point of view is that
none of these projects provides an adequet return for the amount of
risk the company would be taking.

The company must agree to fund Project E (which they want) and least
one of the other four projects.  Since Project E is the only
profitable venture, which two out of four projects would result in the
smallest loss to the company.

Project            Beta Co-efficient       Break-even        Expected return
A                   2.67                    26%               24%
B                   2.33                    24%               22%
C                   3.33                    30%               28%
D                   3.00                    28%               27%
E                   3.00                    28%               32.5%

I added the break-even and expected return columns and I hope this
gives you more information.  Thanks.