20. Payback and NPV. A project has a life of 10 years and a payback
period of 10 years. What must be true of project NPV?



21. IRR/NPV. Consider this project with an internal rate of return of
13.1 percent. Should you accept or reject the project if the discount
rate is 12 percent?

18. Portfolio Analysis. Use the data in the previous problem and
consider a portfolio with weights of .60 in stocks and .40 in bonds.
a. What is the rate of return on the portfolio in each scenario?
b. What is the expected rate of return and standard deviation of the portfolio?
c. Would you prefer to invest in the portfolio, in stocks only, or in bonds only?

21. CAPM and Expected Return. The following table shows betas for
several companies. Calculate each stock?s expected rate of return
using the CAPM. Assume the risk-free rate of interest is 5 percent.
Use a 9 percent risk premium for the market portfolio.

Company Beta
Cisco 2.03
CitiGroup 1.36
Merck .40
Walt Disney .84

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Request for Question Clarification by livioflores-ga on 03 Jun 2005 22:04 PDT

Could you clarify the question?