Reference no: EM133168048
Question 1 - A firm is considering two mutually exclusive projects with equal lives: Project A has an NPV of $100,000, an IR of 12%, and a payback period of 3.1 years. Project B has an NPV of $120,000, an IR of 14%, and a payback period of 2.8 years. The firm should choose _______.
a. Project A because its NPV is higher than Project B's
b. Project A because it's payback period is longer than Project B's
c. Project B because its IRR is higher than Project A's
d. Project B because it's payback period is shorter than Project A's
e. Both projects
Question 2 - According to the capital asset pricing model (i.e., CAPM), if the risk-free rate of return is 2.5%, the expected return on the market portfolio is 11.5%, and the beta of the stock of ABC, Inc. is 1.75, what is the expected rate of return for the company's stock (rounded to 2 decimal places)?
a. 18.25%
b. 20.13%
c. 22.63%
d. 17.63%
c. None of the answers listed above is correct.
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