Three part question, please answer all 3 parts and round answers to 2 decimal places where applicable.

1.a) The CFO of MediSearch plc believes that investing into a project which will develop a new drug for fighting the flu virus, promises a long-term annual return of 13%. The expected return of the market index is RM= 14.2%, the volatility of the market index is M = 10.6%, and the risk-free asset earns Rf = 1%. The CFO has studied similar projects of other companies and believes that the covariance between the returns of this project and the returns of the market is P,M = 0.0111 (in decimal form).

1. b) According to the CAPM, what should be the required return of the project given its beta of 0.67?

1. c) Should the CFO accept the project?