1. You have invested in stocks J and M. From the following information, determine the beta for your portfolio.

Expected Return Amount of Investment Beta

Stock J 0.08 $100,000 1.33

Stock M 0.08 $300,000 0.75

2. Frazier Manufacturing paid a divided last year of $2, which is expected to grow a a constant rate of 5%. Frazier has a beta of 1.3. If the market is returning 11% and the risk-free rate is 4%, calculate the value of Frazier's stock.

3. Assume the following facts about a firm's financing in the next year. Calculate the weighted cost of the capital of this project:

Propertion of Capital project funded by debt = 45%

Propoertion of Capital Project Funded by Equity = 55%

Return Received by Bondholders = 0.09

Return Received by Stockholders = 0.14

4. Capital budgeting analysis of mutually exclusive projects A and B yields the following:

Project A Project B

IRR 18% 22%

NPV $270,000 $255,000

Payback Period 2.5 yrs 2.0 yrs

Management should choose: