Assume you are considering investing in the following project. The economic life of the project is three years.

1. Assume you are considering investing in the following project. The economic life of the project is three years Year 1 Expected net cash flow Coefficient of variation Risk free rate of return Slope of risk/return curve Shift coefficient for leverage Total assets Total equity 15,000 0.10 0.05 0.20 0.05 200,000 120,000 Year 2 16,000 0.11 0.06 0.23 0.06 225,000 110,000 Year 3 17,000 0.14 0.07 0.25 0.07 240,000 100,000 If the net capital outlay for this project is $50,000, no additional working capital is needed, and the market value of assets required under this project is $15,000 at the end of the third year, would you make the investment? Why? 1. Assume you are considering investing in the following project. The economic life of the project is three years Year 1 Expected net cash flow Coefficient of variation Risk free rate of return Slope of risk/return curve Shift coefficient for leverage Total assets Total equity 15,000 0.10 0.05 0.20 0.05 200,000 120,000 Year 2 16,000 0.11 0.06 0.23 0.06 225,000 110,000 Year 3 17,000 0.14 0.07 0.25 0.07 240,000 100,000 If the net capital outlay for this project is $50,000, no additional working capital is needed, and the market value of assets required under this project is $15,000 at the end of the third year, would you make the investment? Why