6. Regarding risk and return: (Answer both (unrelated) parts a and b) 16 a.) Wreckless Motors, a manufacturer of disposable automobiles, is an all-equity firm with a beta of 1.6. The current rate on Treasury bills is 4%, while the market risk premium is 9%. The company is considering a project with an immediate initial investment of $65,000,000 that is expected to generate cash flows of $15,000,000 per year during the first four years of the project and $28,000,000 per year in the remaining two years of the project life. Assuming that the project risk is the same as company risk, what is the Net Present Value of the project and should it be undertaken? b.) Assume you are the financial manager with a budget of $17 million imposed by the financial markets. You may invest in the following independent projects. Investment and cash flow figures are in millions. Net Present Project Investment Value AWO Calculate the Profitability Index, and explain which projects you should choose given the hard capital rationing budget constraint. Which would you choose if there were no capital rationing? Show all work