Ponza Intl has three divisions : Leisure Wear, Graphics, and Household Paints. The company has identified proxy companies in these lines of business whose stocks are publicly traded. Neither Ponza Intl nor the proxy companies employ debt in their capital structures.

On the basis of analysing these stocks in relation to the market index,

Ponza has estimated that the systematic risks of its three divisions are as follows:

DIVISION	Leisure Wear	Graphics	Paints
BETA	1.16	1.64	0.70

The expected return on the market index is 13% and the risk free rate is 7%. The Divisions are evaluating a number of projects which have the following expected returns:

	Project	Division	Expected Return
	1.	Graphics	18 %
	2.	Paint	12 %
	3.	Leisure Wear	26 %
	4.	Leisure Wear	13 %
	5.	Graphics	21 %
Required :	6.	Paint	10 %

Which project should be accepted and which rejected? (Show workings)