1. Rob is considering two projects, both of which have an initial cost of $2,000 and total cash inflows of $15,000. The cash inflows of project A are $1,000, $2,000, $4,000, and $8,000 over the next four years, respectively. The cash inflows for project B are $8,000, $4,000, $2,000 and $1,000 over the next four years, respectively. Which one of the following statements is correct if Tim requires a 10 % rate of return and has a required discounted payback period of 3 years? Given this information, Which project should Rob accept?

2. What is the expected return and risk for the following stock? (10)

State	Probability	Return
Average	.55	.20
Recession	.20	.10
Depression	.25	-.20