A software company Future PLC can invest in either Project C or Project D which have the same initial Year = 0 cost of 275mln and cash-flows:

Project C: 150mln (in Year=1), 250mln (in Year=2)

Project D: perpetuity of 25mln (in Year=1) growing at an annual rate of g=7%

The problem is, that the firm does not know the risk-adjusted discount rate of Project C but it does know that the cash flow betas are 55 (in Year=1) and 85 (in Year=2). It also knows that Project D has the same risk as a market portfolio, which has an annual return of r_m = 15%. Risk-free treasury bonds have an annual return of r_f = 5%. Which project should be chosen by the firm?