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What is the required return on xyz equity

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Reference no: EM132804645

XYZ Inc., an all equity company, is considering undertaking an average risk, 4-year project with the following annual cash flows:

Year 0: -100

Year 1: 0

Year 2: 70

Year 3: 0

Year 4: 70

The company has an equity beta of 0.5, the risk-free rate is 2% (rf = 2%), and the market risk premium is 4% (rM-rf = 4%).

a. What is the required return on XYZ's equity?

b. What is the net present value (NPV) of this project?

Reference no: EM132804645

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