You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows:
Years Cash Flow
0 ... −230
1–10... +25
a. On the basis of the behavior of the firm’s stock, you believe that the beta of the firm is 1.7. Assuming that the rate of return available on risk-free investments is 3% and that the expected rate of return on the market portfolio is 11%, what is the net present value of the project? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.)
NPV $__________
b. Should the project be accepted?
No Yes