Question
You are working for the CFO of a small manufacturing company and are thinking about investing in new equipment. The cost of the project is
You are working for the CFO of a small manufacturing company and are thinking about investing in new equipment. The cost of the project is 9,500 today and it pays of 15,000 in ten years. Your beta is 0.2 and the market risk premium is 5%.
1. What is the NPV of the project if the 10-year Treasury (risk-free) rate is 2.6%?
2. What is the NPV if the 10-year Treasury rate is 3.1%?
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Public Finance and Public Policy
Authors: Jonathan Gruber
4th edition
1429278455, 978-1429278454
