1. A 10-year project is expected to generate annual sales of $156,175, variable costs of $32,481, and fixed costs of $45,642. The annual depreciation is $11,261 and the tax rate is 24 percent. What is the annual operating cash flow?
2. What is the NPV of this project if the required rate is 19%? Year CF 0 -$1,647 1 $1,011 2 $1,609 3 $2,310
3. The risk-free rate is 6.9%, the market risk premium is 9.6%, and the stock’s beta is 1.72. What is the required rate of return on the stock, E(Ri)?
Use the CAPM equation.