Q3.

You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars):

Years from Now	After-Tax CF
0	33
19	12
10	24

The project's beta is 1.4. Assuming r_f = 4% and E(r_M) = 14%.

a.	What is the net present value of the project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Net present value

million

b.	What is the highest possible beta estimate for the project before its NPV becomes negative? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Highest possible beta value

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Q4.

A stock has an expected return of 10%. What is its beta? Assume the risk-free rate is 7% and the expected rate of return on the market is 17%. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Beta

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Q5.

Assume both portfolios A and B are well diversified, that E(r_A) = 13.0% and E(r_B) = 13.7%. If the economy has only one factor, and _A = 1 while _B = 1.1,What must be the risk-free rate? (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Risk-free rate:

%

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