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3. Epsilon Corp. is evaluating an expansion of its business. The cash-flow forecasts for the
project are as follows:
Year
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?
(10 marks)

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