1. Both DW Chemical Company, a large natural gas user, and SP, a major natural gas producer, are thinking of investing in natural gas wells. Both are all equity financed companies. DW and SP are looking at identical projects. They have analyzed their respective investments, which would involve a negative cash flow now and positive expected cash flows in the future. These cash flows would be the same for both firms. No debt would be used to finance the projects. Both companies estimate that their project would have a net present value of $1 million at an 18 percent discount rate and a -$1.1 million NPV at a 22 percent discount rate. DW has a beta of 1.25, whereas SP has a beta of .75. The expected risk premium on the market is 8 percent, and risk-free bonds are yielding 12 percent. Should either company proceed? Should both? Explain.