'ou are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecast project are as follows: Years Cash Flow - 100 1-10 + 14 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.35. Assuming on risk-free investments is 4% and that the expected rate of return on the market portfolio is 13%, wha project? (Negative amount should be indicated by a minus sign. Do not round intermediate calcula nillions of dollars rounded to 2 decimal places.)
'ou are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecast project are as follows: Years Cash Flow - 100 1-10 + 14 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.35. Assuming on risk-free investments is 4% and that the expected rate of return on the market portfolio is 13%, wha project? (Negative amount should be indicated by a minus sign. Do not round intermediate calcula nillions of dollars rounded to 2 decimal places.)
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
Problem 1PS
Related questions
Question
Need help calculating NPV, thank you!
Transcribed Image Text:You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the
project are as follows:
Years
Cash Flow
100
1-10
14
On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.35. Assuming that the rate of return available
on risk-free investments is 4% and that the expected rate of return on the market portfolio is 13%, what is the net present value of the
project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in
millions of dollars rounded to 2 decimal places.)
Net present value
million
Expert Solution
Step 1
Net present value is difference between present value cash flow and initial investment.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education