Question:
A steel comapny is the using the capital asset pricing model to evaluate a possible investment project.
The proposed project involves an investment of 15.2 million to start uo a toy manufacturing plant. the proposed project has about the same risk as the maerket(beta=1) and a project return of 30 percent. Additionally, the project has virtue of helping the company diversify away from total reliance on the steel business. The government bond rate is 12 percent and the market risk premium is 10 percent. For the steel campany as presently constituted, the beta is 2.2 Should the steel company undertake the proposed investment? explain your answer (step of calcualtion must be shown)