The risk-free rate of return is currently 5 percent, and the market risk premium is 4 percent.

Question:

The risk-free rate of return is currently 5 percent, and the market risk premium is 4 percent. The beta of the project under analysis is 1.4, with expected net cash flows estimated to be $1,500 per year for five years. The required investment outlay on the project is $4,500.
a. What is the required risk-adjusted return on the project?
b. Should the project be purchased?