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):
7.14
points
Skipped
Years from Now After-Tax Cash Flow
0
1-10
The project's beta is 1.6.
a. Assuming that rƒ = 4% and E(™M) 18%, 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
-30
14
b. What is the highest possible beta estimate for the project before its NPV becomes negative? (Round your answer to 2 decimal
places.)
Highest beta
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