12.1 Furniture Depot, Inc., is an all-equity firm with a beta of 0.95. The market-risk premium is...

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12.1 Furniture Depot, Inc., is an all-equity firm with a beta of 0.95. The market-risk premium is 9 percent and the risk-free rate is 5 percent. The company must decide whether or not to undertake the project that requires an immediate investment of

$1.2 million and will generate annual after-tax cash flows of $340,000 at year-end for five years. If the project has the same risk as the firm as a whole, should Furniture Depot undertake the project?

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Corporate Finance

ISBN: 9780071229036

6th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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