Problem:
Assume the expected return on the market portfolio is 15% and the riskless return is 9%. Also assume that all of the projects listed here are perpetuies with annual cash flows (in $) and betas as indicated. None of the projects requires or precludes any of the other projects, and each project costs $2,000.
a. What is the NPV of each project?
b. Which projects should the firm undertake?
PROJECT A B C D E F
Annual cash flow 310 500 435 270 385 450
Beta 1.00 2.25 2.22 0.65 1.37 2.36
Please show how you got your answer in excel.