iii) Based on the expected return's beta you have worked out in subquestion 1), use risk- adjusted discount rate method to compute the PV again and verify that the result by this approach is consistent with the ones by the previous two approaches. 3. The XYZ firm can invest in a new DRAM chip factory for $ 425 million. The factory, which must be invested in today, has cash flows two years from now that depend on the state of the economy. The cash flows when the factory is running at full capacity are described by the following tree diagram: Year 0 Year 1 Year 2 GG $ 1 billion if 2 good years G GB $ 200 million if 1 good and 1 bad year BG B BB - $500 million if 2 bad years In year 1, the firm has the option of running the plant at less than full capacity. In this case, workers are laid off, production of memory chips is scaled down, and the subsequent cash flows are half of what they would be when the plant is running at full capacity. An alternative use for the firm's funds is investment in market portfolio. In the states that correspond to the branches of the tree above, $ 1 invested in the market portfolio grows as follows