Consider the following data for a set of projects located in California and Texas.

Assume that California risk free rate is higher than that of Texas due to fiscal constraints, while market returns in Texas are lower than in California due to tax regime differences.

Expected Risk Free Rate for $2024$ in California

Expected Risk Free Rate for $2024$ in Texas

Expected market rate of return for $2024$ in California

Expected market rate of return for $2024$ in Texas

Company projects

Beta

Risk Free Rate

Market risk premium

Project Managers' actual $2024$ return, $\%$

$($A$)$ Calculate and compare over$/$under performance for each project manager $($use SML method as described in Lecture $1$ Part $6).$ Which projects are better performing, which are worse performing and why?

$($B$)$ Your company is considering whether to locate all projects in California or in Texas. Assume that each project capital invested is given as follows:

Capital invested, $ millions

Should your company locate all projects in Texas or in California, or stay put with its current distribution of projects? Explain your answer assuming there is no cost to moving projects.