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You are a financial analyst at a major business valuation firm. You are analyzing how...

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Finance

You are a financial analyst at a major business valuation firm. You are analyzing how a change in beta will impact the present value of corporation that is considering an investment project. The project requires an initial investment of $100 million and will generate an after-tax cash of $20 million in the first year and the cash flow will increase 5% thereafter every year. The projects beta is 1.2. Assume that risk free rate is 6% and the return on the market is 8%. a)What is the net present value of the project ? (sample answer:$115 million) b)What is the highest possible discount rate for the project before its NPV becomes negative ? (sample answer: 15.45%) c)What is the highest possible beta estimate for the project before its NPV becomes negative

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