Your firm is considering an investment in a new one-year project. The project requires an initial investment of $10,000. Based on the probabilities below, the project is expected to produce the following cash flow in one year (and nothing thereafter):

Probability	Cash Flow
25%	10,000
50%	12,000
25%	16,000

Further, according to your analysis, you find that the asset beta of the firm is 1.5, while the project beta is 2, the risk-free rate is 3% and the expected return on the market portfolio is 15%.

What is the present value of the project to the penny i.e $XXXX.XX

Answer rating: 100% (QA)

To calculate the present value of the project we need to discount the expected ... View the full answer