The Following Information Is Associated with a Proposed New Venture

Essay

The following information is associated with a proposed new venture. The initial cost is estimated to be $75,000 and cash inflows over a six-year life are estimated to be $26,000 annually. The firm's cost of capital is 12%. However, another firm, whose sole business is in the same field as the new venture, is publicly traded and has a beta of 1.6. The average stock is currently yielding 11% and the yield on short-term treasury bills is 4%. Calculate the risk adjusted NPV for the project.