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The Spinning Politician Company is considering three mutually exclusive projects, Adscams, ...

The Spinning Politician Company is considering three mutually exclusive projects, Adscams, Boondoggles, and Closures. The following information is provided for the two projects.

	Adscams	Boondoggles	Closures
Initial cash outlay	$12,000	$18,000	$25,000
After-tax cash flows
Year 1	$6,000	$10,000	$11,000
Year 2	$6,000	$10,000	$11,000
Year 3	$6,000	$10,000	$11,000
Year 4	$6,000		$11,000
Year 5	$6,000

All projects can be replicated. The project betas for Adscams, Boondoggles, and Closures are 1.2, 0.9, and 1.5, respectively. The risk-free rate is 4.25% and the expected return on the market is 10.5%.

a) Find the required rates of return for the three projects.
b) Find the NPVs of the three projects.
c) Which project should the company undertake? Why?

Textbook

Corporate Finance

Edition: 5^th

Author: Booth

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Good timing, thanks!

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Thank you, thank you, thank you!

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Just got PERFECT on my quiz

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