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 Now After Tax CF

0 -38

1-9 12

10 24

The project's beta is 1.4. Assuming rf = 6% and E(rM) = 16% a.What is the net present value of the project? (Do not roundintermediate calculations. Enter your answer in millions rounded to2 decimal places.) b. What is the highest possible beta estimatefor the project before its NPV becomes negative? (Do not roundintermediate calculations. Round your answer to 2 decimalplaces.)

Answer & Explanation Solved by verified expert
3.9 Ratings (629 Votes)
1 As per CAPM expected return riskfree rate beta expected return on the market riskfree rate Expected return 6 14 16 6 Expected return 20 Discount rate 20000 Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow stream 38 12 12 12 12 12 12 12 12 12 24    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 Now After Tax CF0 -381-9 1210 24The project's beta is 1.4. Assuming rf = 6% and E(rM) = 16% a.What is the net present value of the project? (Do not roundintermediate calculations. Enter your answer in millions rounded to2 decimal places.) b. What is the highest possible beta estimatefor the project before its NPV becomes negative? (Do not roundintermediate calculations. Round your answer to 2 decimalplaces.)

Other questions asked by students

Q

A species was added to a particular ecosystem to control the population of a prey...

Biology
Q

Two arms of a U-tube are Separated by a semi permeable membrane. In the left arm is...

Biology
Q

True or false- the way we connect multiple light bulbs in (series or in parallel) affects...

Physics
Q

2 The table below shows partial diploid E coli with lac operon mutations 15 pts...

Biology
Q

In an AOL survey of Internet users this question was posted online Have you ever...

Statistics
Q

Find the dimensions of a rectangle in m with perimeter 76 m whose area is...

Calculus
Q

data. The ledger...

Accounting
Q

ouisville City Football Club sells student tickets to its soccer matches for $8. They allocate...

Accounting
Q

On April 1 2020, Westwood Inc. sells goods to Vegas Company in exchange for a...

Accounting
Q

On January 1, 2018, Baddour, Inc., issued 12% bonds with a face amount of $177...

Accounting
Q

5uppose you are the meney manager of a $5,22 milion investment fund. The fund consists...

Finance
Q

A cash budget, by quarters, is given below for a retail company (000 omitted). The...

Accounting