Comments

  1. avatar says

    Hi Stacy, , you get $1.39 because of in your workings you wrote 14.8-0.03 . it should be 0.148- 0.03 instead. try it , you will realize it, common mistake when we do it fast…

    cheerios

  2. avatar says

    Here return to shareholders, E(ri) is equal to cost of capital of the new project.

    I thought the question was asking for the minimum cash flow requirement in perpetuity for the project to be acceptable, in that case nearly 13,000 will give npv is zero, where project can be accepted.On that basis, 15,000 pa for ever is acceptable straight away as it gives a NPV of 15385 positive.

    A nice example to integrate investment appraisal and CAPM.

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