Question: GiS Inc. now has the following two projects available: Assume that RF = 5%, risk premium = 10%, and beta = 1.2. Use the chain

GiS Inc. now has the following two projects available:

Project Initial CF After-tax CF, After-tax CF, After-tax CF, 1 -12,095 5,500 6,000 9,500 2 -3,080 3,450 3,000

Assume that RF = 5%, risk premium = 10%, and beta = 1.2. Use the chain replication approach to determine which project(s) GiS Inc. should choose if they are mutually exclusive.

Project Initial CF After-tax CF, After-tax CF, After-tax CF, 1 -12,095 5,500 6,000 9,500 2 -3,080 3,450 3,000

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