Kanick Corp is evaluating a new venture project and has developed the following decision tree analysis ($M).
Kanick's cost of capital is 12% but a pure play competitor in the new field has been identified with a beta of 1.5. The average stock is returning 14% and treasury bills yield 6%. What is the venture's expected NPV. Discuss its risk characteristics.

Question

Kanick Corp is evaluating a new venture project and has developed the following decision tree analysis ($M). 
  Kanick's cost of capital is 12% but a pure play competitor in the new field has been identified with a beta of 1.5. The average stock is returning 14% and treasury bills yield 6%. What is the venture's expected NPV. Discuss its risk characteristics.

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The Answer of Kanick Corp is evaluating a new venture project and has developed the following decision tree analysis ($M). 
  Kanick's cost of capital is 12% but a pure play competitor in the new field has been identified with a beta of 1.5. The average stock is returning 14% and treasury bills yield 6%. What is the venture's expected NPV. Discuss its risk characteristics.

Kanick Corp Is Evaluating a New Venture Project and Has