1. Project P costs $15,000 and is expected to produce benefits (cash flows) of $4,500 per year for five years. Project Q costs $37,500 and is expected to produce cash flows of $11,100 per year for five years. Calculate each project’s (a) net present value (NPV), (b) internal rate of return (IRR), and (c) modified internal rate of return (MIRR). The firm’s required rate of return is 14 percent. If the projects are independent, which project (s) should be selected? If they are mutually exclusive projects, which project should be selected? Explain.

2. You manage your own portfolio of about twenty stocks. One of which is Honda Motors. The returns on Honda tend to move up and down with the economy as a whole. You decide to sell Honda and replace it with the common stock of Repominus?Man Inc., an asset recovery company.Repominus? Man's shares tend to rise when the economy falls, and vice versa. Your portfolio's beta should

A decrease

B increase

C Either Increase or Decrease

D Remain unchanged