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Lxpected return of 12.1 per cent. hd an expected ret urn of 18.5 per cent. Stock Z has a beta of 0.80 If the risk-free rate is 2 per cent and the market risk premium is correctly priced (Assume that CAPM holds.)? 7.5 per cent, are these equities (a) Stock Y is underpriced and Stock Z is overpriced. (b) Stock Y is underpriced and Stock Z is underpriced (c) Stock Y is overpriced and S Stoc is overpriced and Stock Z is overpriced. (d) Stock Y underpriced IS (e) I choose not to answer. 25. Lookmore ASA has an investment of 150 MNOK. Loo year serial loan. The com kmore expects to finance the project with equity and a 3- pany pays 5 per cent interest on its debt. The target debt-to-equity Just accepted a new 3-year contract. This 3-year contract (project) requires ratio is 1.0, and the debt is repaid by equal installments at year end. The company expects a annual after-tax cash flow of 64 MNOK in all 3 years. The project's be 1.4, the market risk premium is 7 per cent, and the risk-free rate is 4 per cent. The compa asset beta is estimated to ny with corporate tax hold. There are no personal taxes. What is the present value of the investment if Lookmore is financed by equity only? (a) -1.30 MNOK (b)-0.92MNOK (c) 1.02 MNOK (d) 1.94 MNOK (e) I choose not to answer. 10