Your Firm Is Considering a Project That Is Expected to Produce

question 54

Multiple Choice

Your firm is considering a project that is expected to produce a single cash flow of $2,000 next year. The market beta of the project is 2.2. The equity premium is expected to be 6%, and the
Risk-free rate is 3.8%. What is the maximum amount your firm should be willing to invest in
This project? Round your answer to the nearest dollar.

• A)$1,709
• B)$1,639
• C)$1,841
• D)$2,000