1.

You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow 0 100 1-10 + 17 On the basis of the behavior of the firms stock, you believe that the beta of the firm is 1.39. Assuming that the rate of return available on risk-free investments is 6% and that the expected rate of return on the market portfolio is 14%, what is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.)

2.

You are considering the purchase of real estate that will provide perpetual income that should average $55,000 per year. How much will you pay for the property if you believe its market risk is the same as the market portfolios? The T-bill rate is 5%, and the expected market return is 11.0%.