(Answered) Expected return for Jumpmasters stock

Management Studies

Question 1: Assume the following information about the market and Jumpmasters' stock. Jumpmasters' beta = 1.50, the risk free rate is 3.50%. The market risk premium, ie the market return in excess of the risk free rate is 10%. Using the securities market line (SML) in the context of the CAPM. What is the expected return for Jumpmasters' stock?

Question 2: Project A has an NPV of $20, 000 and a PI of 1.2. Project B has an NPV of $10, 000 and a PI of 1.3. Both projects have equal lives. Which project should be preferred if we are not concerned with capital rationing, that is, we are not short of funds.

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