Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in
millions of dollars):
Years from After-Tax Cash
Now
Flow
-100
18
0
1-10
The project's beta is 1.1.
Required:
a. Assuming that rf= 5% and E(M) = 10%, what is the net present value of the project?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
b. What is the highest possible beta estimate for the project before its NPV becomes negative?
Note: Round your answer to 2 decimal places.
a. Net present value
b. Highest beta
1.48
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Transcribed Image Text:You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars): Years from After-Tax Cash Now Flow -100 18 0 1-10 The project's beta is 1.1. Required: a. Assuming that rf= 5% and E(M) = 10%, what is the net present value of the project? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. b. What is the highest possible beta estimate for the project before its NPV becomes negative? Note: Round your answer to 2 decimal places. a. Net present value b. Highest beta 1.48
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