Suppose it is July 2004.

1. Estimate cost of capital for a 2-year project with market risk = 1.2; assume expected annual market risk premium is 6%
2. What would you change (if anything) in your calculations if the project were instead expected to last for 10 years?

4.50 U.S. Treasury Security Yield Curve Interest Rate, in Percent 5.00 4.00 July 30, 2004 3.71 2.68 3.00 2.13 1.77 2.00 1.45 1.00 0.00 3-months 6-months 1-year 2-years 5-years 10-years Maturity of Treasury Securities Course: Foderne Board H. Scale Dard vildsvlet.cuantas