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 -26 1â9 16 10 26 The project's beta is 3.8. Assume rf = 10% and E (rM ) = 17%. Required: (a) What is the net present value of the project? (Enter your answer in millions. Round your answer to 2 decimal places.) Net present value million (b) What is the highest possible beta estimate for the project before its NPV becomes negative? (Round your answer to 3 decimal places.) Highest possible beta estimate
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 -26 1â9 16 10 26 The project's beta is 3.8. Assume rf = 10% and E (rM ) = 17%. Required: (a) What is the net present value of the project? (Enter your answer in millions. Round your answer to 2 decimal places.) Net present value million (b) What is the highest possible beta estimate for the project before its NPV becomes negative? (Round your answer to 3 decimal places.) Highest possible beta estimate
Related questions
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 | -26 | ||
| 1â9 | 16 | ||
| 10 | 26 | ||
| The project's beta is 3.8. Assume rf = 10% and E (rM ) = 17%. |
| Required: | |
| (a) | What is the net present value of the project? (Enter your answer in millions. Round your answer to 2 decimal places.) |
| Net present value | million |
| (b) | What is the highest possible beta estimate for the project before its NPV becomes negative? (Round your answer to 3 decimal places.) |
| Highest possible beta estimate |
| 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 | â29 |
| 1â9 | 15 |
| 10 | 30 |
| The project's beta is 1.8. Assuming rf = 6% and E(rM) = 16%. |
| 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.) |
| Net present value | million |
| 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.) |
| Highest possible beta value |
rev: 06_29_2015_QC_CS-18496
| 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 | â100 |
| 1â10 | +15 |
| a. | On the basis of the behavior of the firmâs stock, you believe that the beta of the firm is 1.4. Assuming that the rate of return available on risk-free investments is 4% and that the expected rate of return on the market portfolio is 12%, 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? | ||||
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