You are a financial analyst at a major business valuation firm. You are analyzing how a change in beta will impact the present value

of a firm that is considering an investment project in a semiconductor manufacturing equipment. The project requires an initial

investment of $$150$ million and will generate a perpetuity of after tax cash of $$22$ million every year forever. The project's beta is $1\mathrm{.}5.$

Assume that risk free rate is $6\%$ and the return on the market is $8\%.$ Please answer the following questions.

What is the appropriate discount rate for the project $($using CAPM model$)?$Blank $1($sample answer:$15\mathrm{.}45\%)$

What is the net present value of the project Blank $2?($sample answer:$115\mathrm{.}00$ million$)$

What is the highest possible discount rate for the project before its NPV becomes negative Blank $3?($sample answer: $15\mathrm{.}45\%)$

What is the highest possible beta estimate for the project before its NPV becomes negative Blank $4?($sample answer: $1\mathrm{.}24)$

Blank $1$ Add your answer

Blank $2$ Add your answer

Blank $3$

Blank $4$

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