Problem

Epsilon Corp. is evaluating an expansion of its business. The cash-flow forecasts for the...

Epsilon Corp. is evaluating an expansion of its business. The cash-flow forecasts for the project are as follows:

Years

Cash Flow ($ millions)

0

−100

1-10

+ 15

The firm’s existing assets have a beta of 1.4. The risk-free interest rate is 4% and the expected return on the market portfolio is 12%. What is the project’s NPV?

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Solutions For Problems in Chapter 8