1. Suppose a project requires a $3000 investment today. In one year there are two possible outcomes: success that occurs with a 70% probability and pays out $4,500 and failure that occurs with a 30% probability and pays out $1000. You finance the project with a $1000 bond, payable in one year, and $2000 in stock. What is expected payout to the stockholder?

2. If your cost of capital is 5%, what is the NPV of Project B?

If your cost of capital is 5%, what is the IRR of Project A?

If your cost of capital is 5%, what is the NPV of Project A?

Suppose you are considering the following mutually exclusive investments: = 0 1 2 3 Project A -1500 500 800 700 Project B -2000 0 0 3000