1. A firm with 50% debt to equity ratio has a cost of equity capital of 15%, a cost of debt of 9% and a tax rate of 33%. The firm is considering a project costing 5,000 that will generate an annual cash flow of 1,000 for the next 8 years. What is the projects NPV?
2. You hold a diversified portfolio consisting of a $10,000 investment in each of 15 different common stocks (i.e., your total investment is $150,000). The portfolio beta is equal to 1.1 . You have decided to sell one of your stocks which has a beta equal to 0.9 for $10,000. You plan to use the proceeds to purchase another stock which has a beta equal to 0.9. What will be the beta of the new portfolio? Show your answer to 2 decimal places.