Question
You are a consultant for a large manufacturing corporation that is considering a project with the following cash flows (in millions of dollars): Years from
You are a consultant for a large manufacturing corporation that is considering a project with the following cash flows (in millions of dollars):
| Years from now | 0 | 1 | 2 | 3 | 4 | 5 | 6 |
| Cash flows | -23.32 | 5 | 7 | 10 | 10 | 5 | 5 |
You have just estimated that the projects beta is 1.4. The risk-free rate is 7% and the expected return of the market is 12%.
(a) What is the discount rate for this project?
(b) What is the NPV of the project?
(c) What is the highest possible beta estimate for the project before its NPV becomes negative?
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Short Term Financial Management
Authors: Ned C Hill
1st Edition
0023548207, 978-0023548208
