1. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.

Time:	0	1	2	3
Project A Cash Flow	-26,000	16,000	36,000	7,000
Project B Cash Flow	-36,000	16,000	26,000	56,000

Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? rev: 12_04_2012

2. Hollywood Shoes would like to maintain their cash account at a minimum level of $52,000, but expect the standard deviation in net daily cash flows to be $4,200; the effective annual rate on marketable securities to be 6.50 percent per year; and the trading cost per sale or purchase of marketable securities to be $120 per transaction. What will be their optimal upper cash limit? (Round your answer to the nearest dollar amount.)