The Following Information Is Associated with a Proposed New Venture

question 58

Essay

The following information is associated with a proposed new venture. The initial cost is estimated to be $75,000 and cash inflows over a six-year life are estimated to be $26,000 annually. The firm's cost of capital is 12%. However, another firm, whose sole business is in the same field as the new venture, is publicly traded and has a beta of 1.6. The average stock is currently yielding 11% and the yield on short-term treasury bills is 4%. Calculate the risk adjusted NPV for the project.

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Definitions:

Emotion

A complex state of feeling that results in physical and psychological changes influencing thought and behavior.

Introverts

Individuals who prefer minimally stimulating environments and tend to focus on internal thoughts and feelings rather than seeking external stimulation.

Extraverts

Individuals who are characterized by their outgoingness, high energy, and ease in social situations, often seeking stimulation from the external environment.

Eyes

Organs of vision that detect light and convert it into electro-chemical impulses in neurons.