Assume the following about an investment project with a cost of $1,500 that is being considered by management:
- The project will generate cash flow X (2) at time 2 that is normally distributed with mean $1,000, and standard deviation $100.
- The project will generate cash flow X (3) at time 3 that is normally distributed with mean $1,200 and standard deviation $200.
- The market return is normally distribution with a mean of 10% and standard deviation 0.005.
- The correlation between X (2) and the market return is 0.8.
- The correlation between X (3) and the market return is 0.4.
How would management value the project if the borrowing and lending rates in the market are 8% and the project cannot be resold?