1. A stock has an expected return of 13 percent, its beta is 1.4, and the expected return on the market is 10 percent. What must the risk-free rate be?
2. Which of the following is one of the steps necessary for conducting a capital budgeting analysis of a project?
Determining the systematic risk of the project
Deciding on how the capital required will be raised
Estimating the project’s future cash flows
Computing the debt-to-equity ratio of the firm
3. What is the payback period for a $20,000 project that is expected to return $6000 for the first two years and $3000 for years three through five?
3.67 years
4.50 years
4.67 years
4.76 years