A project with a beta of 0.75 generates after-tax incremental cash flows of $20,000 per year. The expected return on the market is 8% and the risk free rate is 3%. For how many years must the project generate cash flows in order for the project to just be an acceptable investment for an organization if the initial investment required for the project is $50,000?
A project with a beta of 0.75 generates after-tax incremental cash flows of $20,000 per year. The expected return on the market is 8% and the risk free rate is 3%. For how many years must the project generate cash flows in order for the project to just be an acceptable investment for an organization if the initial investment required for the project is $50,000?
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
Section: Chapter Questions
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Transcribed Image Text:A project with a beta of 0.75 generates after-tax incremental cash flows of $20,000 per year. The
expected return on the market is 8% and the risk free rate is 3%. For how many years must the
project generate cash flows in order for the project to just be an acceptable investment for an
organization if the initial investment required for the project is $50,000?
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