What is the appropriate discount rate for the project

Reference no: EM132206453

Question - Applying CAPM: You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars):

Years from Now	After-Tax Cash Flow
0	-40
1-10	15

The project's beta is 1.8. Assuming that r_f = 8% and E(r_M) = 16%, according to CAPM:

a. What is the appropriate discount rate for the project?

b. What is the net present value of the project?

c. What is the highest possible beta estimate for the project before its NPV becomes negative?

Reference no: EM132206453

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