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Ajax Co Ltd is considering investing in a Manufacture project in Africa. Initial estimates of the returns of the project have revealed the following...
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Ajax Co Ltd is considering investing in a Manufacture project in Africa.

Initial estimates of the returns of the project have revealed the following figures:
PROBABILITY                                    RETURNS
0.10                                                        -15%
0.20                                                         16%
0.35                                                         20%
0.25                                                         35%
The current risk-free rate of return in the market is 7.5%. Ajax Co board of directors has decided that infrastructure projects are risky in general and as such a risk premium of 15% is required.
Should Ajax Co invest in this particular project? Why or why not?

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