Tokyo Co. is considering a project with an initial cost of $4 million. The project will produce cash inflows of $1.5 million a year for five years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is 2% higher. The firm has a basic weighted average cost of capital of 12%. What is the net present value of the project?

Group of answer choices

$2.22 million

$1.15 million

$2.56 million

$1.41 million

Using the Weighted Average Cost of Capital of another firm (who runs similar business) as the required return for a project is referred to as the:

Group of answer choices

subjective approach.

pure play approach.

game book play.

insider trade.