Problem:
The risk-free rate of return is currently 5% and the market risk premium is 4%. The beta of a project under analysis is 1.4, with expected net cash flows estimated to be $1,500 per year for 5 years. The required investment outlay on the project is $4,500.
Required:
Question: What is the required risk-adjusted return on the project? Should the project be purchased?
Note: Show all workings.