Question: 1) Which project(s) should a firm choose when the projects are independent? When they are mutually exclusive? Suppose both are within the capital budget and

1) Which project(s) should a firm choose when the projects are independent? When they are mutually exclusive? Suppose both are within the capital budget and k is 13 percent for both projects.

Project A: CF₀ = $2700; CF₁ = $1040; CF₂ = $4040; CF₃ = $1540 Project B: CF₀ = $2700; CF₁ = $1040; CF₂ = $1040; CF₃ = $4440

a) Neither project; neither project

b) Both projects; Project A

c) Project B; Project B

d) Both projects; Project B

2) Suppose you have a portfolio that has $250 in stock A with a beta of 1.00, $1,000 in stock B with a beta of 1.30, and $750 in the risk-free asset. You have another $500 to invest. You wish to achieve a beta for your whole portfolio to be the same as the market beta. What is the beta of the added security?

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