Polycorp is investigating two projects. The risk-free rate is 3% pa and the market return is 8%pa. Project A has a beta of .7 and Project B has beta of 1.6. The projects are independent. If accepted the projects will initially be funded by borrowing at 5%pa. The relevant net cash flows for each project are below. The firm's current weighted average cost of capital is 11% pa (before taking either or both A and B). Assume no taxes. Calculate the NPV of each project and indicate which project or projects should be accepted/rejected. Explain your choice of the discount rate and your adjustment for risk.

Year               0                1                      2

A).               (10000)         5300              7400

B).               (15000)         8700             9500