You are a financial analyst at a major business valuation firm. You are analyzing how a change in beta will impact the present value of corporation that is considering an investment project. The project requires an initial investment of $100 million and will generate a perpetuity of after tax cash of $15 million every year forever. The project’s beta is 2. Assume that risk free rate is 6% and the return on the market is 8%. Please answer the following questions.

What is the net present value of the project ?

What is the highest possible discount rate for the project before its NPV becomes negative ?

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

Answer rating: 100% (QA)

To calculate the net present value NPV of the project we need to discount the cash flows generated b... View the full answer