Question: Problem 3 Project A is different than the normal project that the company has undertaken in previous years. You have the following observations from the

Problem 3 Project A is different than the normal project that the company has undertaken in previous years. You have the following observations from the market: Government mare yielding 4% 13X return is 14% rm's beta is 0.90 We rm has a tax rate of'i. A newI debt issue will be sold at par with an 8% coupon. You remember your professor mentioning something about a 'pure' play company in class. Your research in the market has provided information about a oompany that is in the same type of industry as project A. Pure Play lnfon'nation Beta 1.2 Debttoequity ratio 2 Tax rate 35.0% a. Project A has an IRR of 9.130%. Using a debttoequity ratio of 1 and a risk adjusted cost of capital for project A, would you accept the project? Show your work! b. Why is it important for the rm to use a risk adjusted discount rate for any projects the firm is analyzing

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