1. Assume that risk-free interest rate is 3% and that equity risk premium is 4%. A company worth NOK 800 million
has a beta related to CAPM of 3. It has come up with proposals for a project that costs NOK 80 million. The project is expected to pay out NOK 88 million next year. The beta for this new project is estimated at 0.5.
a. If the company does everything 100% right, what will be the present value of the project? Should offers accept project?
b. However, User uses Usual Capital Cost (WACC) to calculate present value. Want the available projects now?