Yolkin Inc has 100% equity financing and no debt. Its current risk premium is 10%. Yolkin estimates that a new investment will return 12.8%. At what range of risk-free rates should Yolkin accept the project?

Group of answer choices

Accept if risk-free rate < 2.8%

Accept if risk-free rate < 10%

Accept if risk-free rate > 2.8%

Accept if risk-free rate > 10%

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Cassius Chemistry is looking to invest in a production facility. Option one is a new state-of-the-art facility with a cost of $20 million. This new facility will produce cash flows of $7 million per year for the next six years. At the end of the sixth year, Cassius will have to reclaim the land under the new facility at a cost of $14 million. Option two is a used facility that will generate $4 million in cash flows for the next six years, but require no land reclamation. This used facility costs $15 million. If Cassius estimates its cost of capital to be 11.2%, which project should it accept? Why?

Group of answer choices

Accept new facility; NPV $9.44 mil vs. $1.83 mil

Accept used facility; NPV $9.00 mil vs. $8.00 mil

Accept new facility; NPV $2.04 mil vs. $1.83 mil

Accept used facility; NPV $9.00 mil vs $-4.56 mil

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