You are considering an investment project with the following cash flows.

Year 0 Cash Flow	Year 1 Cash Flows
	Strong economy	Weak economy
-$480	$800	$400

The scenarios are equally likely. The cost of capital is 20%.

1.Calculate the NPV of the project?

Assume you undertake the project.

2.What is the current value of the project?

3.You decide to finance this project with 20% debt and 80% equity. The interest rate on the debt is 5%. Calculate the amount of debt and equity.

4.Calculate the expected return of the equity holder?

5.What is the risk premium of the equity?