& Regarding risk and return: (Answer both (unrelated) parts a and b) a.) Wreckless Motors, a manufacturer of disposable automobiles, is an all-equity firm with a beta of 1.67. The current rate on Treasury bis is49, while the market risk premium is 8% The company is considering a project $45,000,000 $10,000,000 per year during the first four years of $25,000,000 per year in with an immediate initial investment of that is expected to generate cash flows of the project and the remaining two years of the project life Assuming that the project risk is the same as company risk, what is the Net Present Value of the project and should it be undertaken? b.) Assume you are the financial manager with a budget of $18 miltion imposed by the financial markets. You may invest in the following independent projects. Investment and cash flow figures are in millions Net Present Value ProjectInvestment Calculate the Profitability Index, and explain which projects you should choose given the hard capital rationing budget constraint. Which would you choose if there were no capital rationing? Show all work! 7. Ms. Flo N. Lowe, a project analyst at Grounded Aircraft, would like her idea of on-board gift shops included in next years capital budget. According to her report, the following can be expected in each of the five years of the gift shop's expected life.(answer parts a, b and c) Years 1-5 Year 0 $200,000 Investment Sales Variable costs@ 75% Fixed costs Depreciation Pretax Profit Taxes @ 40% $400,000 300,000 30,000 40,000 30,000 12,000 18,000 40,000 58,000 After-tax Profits Depreciation Cash Flows Assume the cost of capital is 12%. NPV $9,077