Question
You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars): YEARS FROM
You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars):
| YEARS FROM NOW | AFTER TAX CF |
| 0 | -27 |
| 1-9 | 16 |
| 10 | 32 |
The project's beta is 1.6. Assuming rf = 4% and E(rM) = 14%
a. What is the net present value of the project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
b. What is the highest possible beta estimate for the project before its NPV becomes negative? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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Case Studies in Finance Managing for Corporate Value Creation
Authors: Robert F. Bruner, Kenneth Eades, Michael Schill
7th edition
007786171X, 77861711, 978-0077861711
