Question
You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are
You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow 0 220 110 +20 a. On the basis of the behavior of the firms stock, you believe that the beta of the firm is 1.6. Assuming that the rate of return available on risk-free investments is 8% and that the expected rate of return on the market portfolio is 10%, what is the net present value of the project? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) NPV $ b. Should the project be accepted? No Yes
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