QP 13 18. Projects That Are Not Scale Enhancing Blue Angel, Inc. a private rm in the holiday gift industry. is considering a new project. The company currently has a target debt-equity ratio of .40. but the industry target debt-equity ratio is .35. The industry average beta is 1.2. The market risk premium is II' percent and the riskvfree rate is 5 percent. Assume all companies in this industry can issue debt at the riskfree rate. The corporate tax rate is 2| percent. The project requires an initial outlay of$TSS,[lOO and is expected to result in at $93.000 cash inow at the end of the rst year. The project will be nanced at the company's target debt~equity ratio. Annual cash flows from the project will grow at a constant rate of 5 percent until the end ofthe fth year and remain constant forever thereafter. Should the company invest in the project