A firm has 500,000 shares outstanding at a price of $100 /share so that its market value is (500k)($100)= $50M. The firm's investment projects are financed by debt only. Currently the firm is considering an investment project that will cost $1,000,000 and generate cash flow of $500,000,$400,000,$400,000, and $150,000 in years I through 4 . a. (i) If the current required rate of return is 20%, find the present value of the eash flows. Note: This is actually a net present value. ( 5 points) (ii) Based on your answer in part (i), should the firm invest in this project? (3 points) b. (i) The Federal Reserve decides to stimulate the economy by purchasing a large quantity of Treasury Securitics. The outcome is that the required rate for the firm is now 15%, Find the present value of the cash flows (or net present value) as in part a(i). ( 5 points) (ii) Based on your answer in b(i), should the firm invest in this project? ( 3 points) c. (i) Based on your answer to b(ii), how much value is added to each share? (4 points) (ii) If the price of each share was $100 before, how much will it be after news of this investment is made public? Note: Apply Semi-Strong Form EMH. (3 points) d. If the firm invests in the project, has the project been indireetly made liquid? Note; This is for the rate at 15% case. ( 2 points)