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: Flex 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

Find the range of the function f(x) = -5 (3)x-1Select one:a. (-?,-1)b. (-?,?) c. (1.,?)d....

Algebra
Q

Can you find any mutation, name the domains, if the proteins are conserved, and the amino...

Biology
Q

A solid, homogeneous sphere with a mass of m0, a radius of r0 and a density...

Physics
Q

11 In the circuit shown in figure if ammeter and voltmeter are ideal then the...

Physics
Q

A FireFighting Vehicle is moving with a certain velocity at speed V on a straight...

Physics
Q

Evaluate cos [tan -(1) - cos-(-?3/2)].(1) If cos x = -1/2 with in Qll...

Algebra
Q

Please help, i tried but i dont really understand how to get the answer...

Accounting
Q

C. Risk and return Allow 10 minutes for this question (including uploading if done offline)...

Accounting
Q

Great Adventures Problem 7-1 The following information applies to the questions displayed below Tony and...

Accounting
Q

Assume a company provided the following information: \table[[,Service Departments,Operating Departments],[,Cafeteria,Jar,itorial,,ab,Tech],[Departmental costs,$215,000,,140,000,,232,000,$950,000

Accounting
Q

During a year, Mark's monthly sales compensation ranged between $20,500 and $27.900 per month and...

Accounting
Q

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall...

Accounting