1.A real estate development firm is looking to invest in a new apartment complex that requires an initial investment of $8 million today. This project will yield free cash flows of $1 million each year for the next 15 years (fromt=1 tot=15). The firm is financed half with equity and half with bonds (assume no cash). The firm's beta is 1.5, the yield to maturity on its debt is 6.0%, and its tax rate is 20%. If the expected return on the S&P500 Index is 7.0% and the risk-free rate is 1.0%, what is the NPV of this project (in millions)?

A. -$4.67 million

B. -$1.12 million

C. 0

D. $.88 million

E. 1.75 million

2.Suppose Big Tree Recycling Company has a beta of 1.2. The market risk premium is 8% and the risk-free rate is 6%.The company's last dividend was $2/share and this is expected to grow at 8% indefinitely. The stock currently sells for $30/share.What is Big Tree's cost of equity capital based on the Dividend Pricing Model?

A. 15.2%

B. 15.4%

C. 15.6%

D. 14%

E. information is missing

3.A project has a beta with respect to the S&P 500 of 1.88. The market is expected to return 12% over the next year, and one-year treasury bills are yielding 1.3%. What is the required rate of return on this project?

A. 15.4%

B. 6.9%

C. 12%

D.16.5%

E. 21.4%

4.How does the level of systematic risk in this portfolio compare with the market's systematic risk?

Security Amount Invested Expected Return\ Beta Stock A $ 1,000 BO Stock E $ 2,000 12%6 95 Stock C $ 3,000 15%6 1 . 1 Stock D $ 4.000 18% 1. 4