You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars):
|
Years from Now
|
After-Tax Cash Flow
|
|
0
|
-40
|
|
1-10
|
15
|
The project's beta is 1.8. Assuming that rf = 8% and E(rM) =16%, what is the net present value of the project? What is the highest possible beta estimate for the project before its NPV becomes negative?