Suppose the company is analyzing a project that requires a net investment of $5.0 million. The project looks very promising and is forecasted to generate annual net cash flows of $15.0 million each year for the next five years.

If the project is considered to be of average risk, its NPV would be:

$8.14 million

$48.80 million

$47.76 million

-$5.00 million

If the project is considered to have a lower risk than the average risk of projects in the company, and has a beta of 0.80, then the projects NPV would be:

-$5.00 million

$47.76 million

$8.44 million

$48.80 million