1. (Chapter 14) Project 1 has a beta of 0.65 and a projected return of 12 percent. Project 2 has a beta of 0.9 and a projected return of 17 percent. Project 3 has a beta of 1.4 and a projected return of 19 percent. Given the risk-free rate is 8 percent and the market risk premium is 8.5 percent, which projects should be accepted if the firm’s beta is 1.2?

2. (Chapter 10) You are considering investing in a cost cutting proposal. Net income from the project is expected to equal $27.50 each of the three years of the project’s life. The process has an initial cost of $125 and will be depreciated straight line over 3 years to a salvage value of $0. Assume a 34 percent tax bracket and a discount rate of 15 percent. Suppose the equipment is sold at the end of year 3 for $20, pretax. What is the net present value? (Round to the nearest whole dollar)

3. (Chapter 15) Amalgamated Bottle Cap, Inc. needs to raise $5 million. If the subscription price is $10, the stock price $12.50, and there are 4,000,000 shares outstanding, how many rights will buy a share of stock?