A company has a project with initial investment is $40,000. It will generate $15,000 annually for the next four years. Assume that this company and its project have a beta of 2.0, the risk-free rate of return (i.e., R is 256, and the market return (Le., R is 796?. How much is the NPV of this project? [Hint: As discussed, the CAMP model can be used to estimate discount rate (n in the NPV analysis equation). 5,555 B) 3.333 C) 4,444 D) 6,666

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A company has a project with initial investment is $40,000. It will generate $15,000 annually for the next
four years. Assume that this company and its project have a beta of 2.0, the risk-free rate of return (i.e., R
is 296, and the market return (Le., R is 796?. How much is the NPV of this project? [Hint: As discussed, the
CAMP model can be used to estimate discount rate (r) in the NP analysis equation].
A)
5,555
B)
3,333
C)
4,444
D)
6,666
Transcribed Image Text:A company has a project with initial investment is $40,000. It will generate $15,000 annually for the next four years. Assume that this company and its project have a beta of 2.0, the risk-free rate of return (i.e., R is 296, and the market return (Le., R is 796?. How much is the NPV of this project? [Hint: As discussed, the CAMP model can be used to estimate discount rate (r) in the NP analysis equation]. A) 5,555 B) 3,333 C) 4,444 D) 6,666
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