The Chris-Kraft Co. is financed entirely with equity and the firm has a beta of 1.55. The current risk-free rate is 6 percent and the expected market return is 12 percent. Chris-Kraft is considering an investment project with a risk that matches the firm's average risk, requires a net investment of $60,000, and has net cash flows of $16,000 per year for 7 years.
(A) What should be the required rate of return on the project?
(B) What is the NPV of the project?
(C) Should Chris-Kraft invest in the project?