Exercise 7 You are a consultant to a corporation that plans to buy a project whose net cashflows in millions of dollars are below Years from now 0 1 to infinity (perpetual) Net cashflow -146 19.13 The return on the market portfolio is 6.49% and the risk-free rate is 1.98% What is the highest possible beta estimate for the project before its NPV becomes negative? (10 pts) (A) 2.31 (B) 2.47 [C) 1.92 (D) 1.62 Exercise 8 Two stocks D and T have the following data: Stock D T Correlation Rate of Standard with Market return deviation portfolio 11.74% 0.22 0.45 15.6% 0.28 0.33 If the Capital Asset Pricing Model holds for these two stocks then 1) Build a risk-free protfolio (10 pts) Answer: W of D= W of T = 2) What is the risk-free rate (5 pts) Answer= 3) Build a portfolio that has a beta = 1 (10 pts) Answer: W of D= W of T= 4) What is the return on the market portfolio (5 pts) Answer=