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

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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 Now After-Tax CF 0 –36 1–9 1210 24 The project's beta is 1.5. Assuming rf = 4% and E(rM) = 12%a. What is the net present value of the project? (Do not roundintermediate calculations. Enter your answer in millions rounded to2 decimal places.) Net present value million b. What is the highestpossible beta estimate for the project before its NPV becomesnegative? (Do not round intermediate calculations. Round youranswer to 2 decimal places.) Highest possible beta value

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3.8 Ratings (465 Votes)

a As per CAPM expected return riskfree rate beta expected return on the market riskfree rate Expected return 4 15 12 4 Expected return 16 Discount rate 16000 Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow stream 36 12 12 12 12 12 12 12 12 12 24 See Answer

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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 Now After-Tax CF 0 –36 1–9 1210 24 The project's beta is 1.5. Assuming rf = 4% and E(rM) = 12%a. What is the net present value of the project? (Do not roundintermediate calculations. Enter your answer in millions rounded to2 decimal places.) Net present value million b. What is the highestpossible beta estimate for the project before its NPV becomesnegative? (Do not round intermediate calculations. Round youranswer to 2 decimal places.) Highest possible beta value