1. Stock R has a beta of 1.5, Stock S has a beta of 0.6, the expected rate of return on an average stock is 11%, and the risk-free rate of return is 4%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places.
2. A five-year project has an initial fixed asset investment of $340,000, an initial NWC investment of $36,000, and an annual OCF of −$35,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 11 percent, what is this project’s equivalent annual cost, or EAC?