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    Portfolio Theory: Net Present Value

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    Epsilon Corp. is evaluating an expansion of its business. The cash-flow forecasts for the project are as follows:

    Years Cash Flow ($ millions)
    0 -100
    1-10 +15

    The firm's existing assets have a beta of 1.4. The risk-free interest rate is 4% and the expected return on the market portfolio is 12%. What is the project's NPV?

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    Solution Preview

    Asset beta=b=1.40
    Risk free rate=rf=4%
    Expected market return=rm=12%
    Expected return on ...

    Solution Summary

    Solution describes the steps to calculate NPV in the given case.