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Bore and Gush, an oil-drilling firm located in Lubbuck, Texas, is an all-equity firm with a beta of 1.15. The current rate on Treasury bills
- Bore and Gush, an oil-drilling firm located in Lubbuck, Texas, is an all-equity firm with a beta of 1.15. The current rate on Treasury bills is 3%, while the market risk premium is 10%. The company is considering a project with an immediate initial investment of $2,500,000 that is expected to generate cash flows of $500,000 per year during the first two years of the project and $750,000 per year in the remaining four years of the project life. Assuming that the project risk is the same as company risk, should the project be undertaken?
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