Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you are a consultant to a large manufacturing corp

You are a consultant to a large manufacturing corporation considering a project with the following net...

80.2K

Verified Solution

Question

Finance

You are a consultant to a large manufacturing corporationconsidering a project with the following net after-tax cash flows(in millions of dollars):


Years from NowAfter-Tax CF
0–23
1–910
1020


The project's beta is 1.7. Assuming rf = 6%and E(rM) = 16%.


a.

What is the net present value of the project? (Do notround intermediate calculations. Enter your answer in millionsrounded to 2 decimal places.)


  Net present valuemillion


b.

What is the highest possible beta estimate for the projectbefore its NPV becomes negative? (Do not round intermediatecalculations. Round your answer to 2 decimal places.)


  Highest possible beta value  

Answer & Explanation Solved by verified expert
4.1 Ratings (629 Votes)
a As per CAPM expected return riskfree rate beta expected return on the market riskfree rate Expected return 6 17 16 6 Expected return 23 Project Discount rate 23000 Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow stream 23 10 10 10 10 10 10 10 10 10    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

You are a consultant to a large manufacturing corporationconsidering a project with the following net after-tax cash flows(in millions of dollars):Years from NowAfter-Tax CF0–231–9101020The project's beta is 1.7. Assuming rf = 6%and E(rM) = 16%.a.What is the net present value of the project? (Do notround intermediate calculations. Enter your answer in millionsrounded to 2 decimal places.)  Net present valuemillionb.What is the highest possible beta estimate for the projectbefore its NPV becomes negative? (Do not round intermediatecalculations. Round your answer to 2 decimal places.)  Highest possible beta value  

Other questions asked by students

Q

The figure shows a 800 foot tower on the side of a hill that forms...

Calculus
Q

Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2015, with...

Accounting
Q

Let 9 A 2 25 4 Find an invertible matrix C and a diagonal matrix...

Basic Math
Q

An election ballot asks voters to select four city commissioners from a group of fourteen...

Calculus
Q

Given the equation of the sphere x 2 y 3 z 1 2 What are...

Algebra
Q

Bad Erads BBC had cosh fiows for the year as follows is in...

Accounting
Q

For the company Apple, look up the following information on yahoo finance. Looking at the...

Accounting
Q

I need part A! Journal entries AND the T accounts ...

Accounting
Q

Exercise 11-35 Subsequent expenditures [LO11-9 Belltone Company made the following expenditures related to its 10-year-old...

Accounting
Q

The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in eight years,...

Finance
Q

Do you believe it is a good idea for Governments and Governmental Not-for-Profits to have...

Accounting
Q

Exercise 7-13 On July 1, 2017, Whispering Inc. made two sales. 1. It sold land...

Accounting