1. Piedmont Hotels is an all-equity company. Its stock has a beta of .84. The market risk premium is 7.1 percent and the risk-free rate is 4.3 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.9 percent to the project's discount rate. What should the firm set as the required rate of return for the project?
2. Gateway Communications is considering a project with an initial fixed assets cost of $1.69 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $230,000. The project will not change sales but will reduce operating costs by $382,500 per year. The tax rate is 40 percent and the required return is 10.5 percent. The project will require $47,000 in net working capital, which will be recouped when the project ends. What is the project's NPV?