# Expected Return and CAPM

9. Bill plans to open a do-it-yourself dog-bathing center in a storefront. The bathing equipment will cost $160,000. Bill expects the after-tax cash inflows to be $40,000 annually for 7 years, after which he plans to scrap the equipment and retire to the beaches of Jamaica. Assume the required rate of return is 10%. What is the project's NPV?

a. $14,210

b. $27,322

c. $32,556

d. $34,737

e. $45,001

10. What is the expected market return if the expected return on asset A is 16% and the risk-free rate is 7%? Asset A has a beta of 1.2.

a. 9.5%

b. 14.5%

c. 16.5%

d. 17.5%

e. 20.5%

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#### Solution Preview

9.

You can use a financial calculator or excel to solve such questions. I'll tell you the formula in Excel. In Excel ...

#### Solution Summary

The solution provides detailed answers and explanation for the two multiple choice questions being asked. The solution does not only give the correct letter response but also provides a detailed explanation for the correct answer. The solution is very easy to follow along for anyone with a basic understanding of CAPM and finance. Overall, an excellent response to the question being asked.