1. Gutweed Co. is considering a project with an initial cost of $4 million. The project will produce cash inflows of $1.5 million a year for five years. The firm has a weighted average cost of capital of 9%. Assume that the project has an average risk level as the whole firm. What is the net present value of the project?

   		$1.83 million
   		$3.22 million
   		$0.92 million
   		$2.41 million

Given the following data for a stock: beta = 1.2; risk-free rate = 3%; market rate of return = 13%; and expected rate of return on the stock = 17%. Then the stock is:

		overpriced
		correctly priced
		underpriced
		cannot be determined