Is the given project profitable

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The firms cost of equity capital is 18%, the market value of the firms equity is $8 million, the firms cost of debt capital is 9%, and the market value of debt is $4 million.

The firm is considering a new investment with an expected rate of return of 17%. This project is 30% riskier than the firms average operations. The riskless rate of return is 5%; the variance of the market return is .08. Is the project profitable? [Assume a world without taxes.]

Reference no: EM131247295

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