1.

Berkshire Hathaway stock has a standard deviation of 22% and a beta of 1.4. Microsoft stock has standard deviation 31% and beta of 1.2. Which of these statements is true?

Group of answer choices

Microsoft is a riskier investment for a diversified investor.

Microsoft has less total and systematic risk.

Microsoft has less total risk; Berkshire has less systematic risk.

None of the above.

2.

Nike has spent $2.5 million (today) to develop and promote a limited edition Justin Herbert sneaker. This shoe is expected to generate incremental free cash flows of $10.0 million in 1 year and $8.0 million in 2 years before being retired.

Nike's CAPM beta is 0.82, its market capitalization is $200 billion, and it has basically no net debt. Its tax rate is 22%. The risk-free rate is 1.0% and the market risk premium is expected to be 5.0%. What is the NPV of this sneaker investment (in millions)?

Group of answer choices

10.9

11.0

12.1

13.2

14.3

15.4