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Given the same firm as above, with $250 million in market value of debt outstanding and S750 million in equity outstanding. The debt has a

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Given the same firm as above, with $250 million in market value of debt outstanding and S750 million in equity outstanding. The debt has a Beta of 0.1 and equity has a Beta of 12. Assume the risk-free rate is 1% and the market premium is 79. Assume the coupon on the debt is equal to its yield. The firm faces a 21% marginal tax rate. The firm's CFO wants to undertake a new project with a 5% expected return (IRR, first negative, then positive cash flows) and finance it with additional debt. The additional debt would have the same yield as the existing debt. Is this a good investment for the firm? Yes, you should undertake the project No, you should not undertake the project. Insufficient information provided to make a determination It does not matter whether or not you take the project

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