a. Your uncle asks you to evaluate a project that has the following properties: (1) The project has conventional cash flows and (2) The project has a discounted payback period that is less than the projects life. What can you conclude about its NPV? Briefly explain your conclusion.

b. In a world with risk-free borrowing and lending, efficient portfolios have NO unsystematic risk. Is this statement true or false? Briefly explain your answer.

C. Consider two competing, (very) long-term, and ambitious starship projects, U and Q, whose cash flow patterns look like the following: Year 0 1 2 n -U. U U U U Project U Project Q -Qo Q Q Q Q Note: three dots between 2 and n above denote Years 3,4,5, and so on until Year n - 1. Thus, the project's cash flows display the following properties: both projects have the same length, n years; each project has conventional cash flows (a single cash outflow in Year 0 and all cash inflows afterwards; each project has equal cash inflows from Year 1 through Year n. You are also given the following information: U Q > U lo Which project has a higher IRR? Show why or how. C. Consider two competing, (very) long-term, and ambitious starship projects, U and Q, whose cash flow patterns look like the following: Year 0 1 2 n -U. U U U U Project U Project Q -Qo Q Q Q Q Note: three dots between 2 and n above denote Years 3,4,5, and so on until Year n - 1. Thus, the project's cash flows display the following properties: both projects have the same length, n years; each project has conventional cash flows (a single cash outflow in Year 0 and all cash inflows afterwards; each project has equal cash inflows from Year 1 through Year n. You are also given the following information: U Q > U lo Which project has a higher IRR? Show why or how