Question: eshare project is going to be launched through both equity...
eShare project is going to be launched through both equity and debt capital. The capital details is given below:
- Equity: the project manager intends to build up a support fund for the initial capital outlay and working capital of $600,000 with 60% funded by equity.
Based on a listed company, he concluded the beta of 0.8 for the project. The government bond yield in 10 years is 2%. The market risk premium is found to be 5%.
- Debt: the manager just signed a deal with Commonwealth Bank to borrow the rest of the capital for 4%.
He also forecast the expected net cash flow of the project in the table below (the project is expected to run in 4 years:
|Net cash flow||50,000||100,000||450,000||400,000|
Is the project feasible?