part1:

You're considering a risk-free project that will create cash flows over 20 years. If you can use only one discount rate, what is the appropriate cost of capital?

part2:

You're considering a project that is about as risky as the stock market and will create cash flows indefinitely. If you can use only one discount rate, what is the appropriate cost of capital?

part3

You're considering a project that is right between the stock market and Treasuries with respect to risk. It will create cash flows for 10 years. If you can use only one discount rate, what is the appropriate cost of capital?

Problem 3 Intro Treasury yield curve: 3 5 10 Time to maturity 1 year years years years Yield to maturity 0.6% 1.4% 2.6% 5.1% Equity premium: Arithmetic average Geometric average 7% 5% Vis-a-vis Treasury bills Vis-a-vis Treasury bonds 5% 3.5%