here we go 1. NPV assumes that cashflow are reinvested at the Cost of Capital which is the Average rate it pays investors. So answer is D. 2. A larger interest rate will reduce will not reduce initial Cashflow. So answer is A. 3. According to one study done some time ago, more than 80% of small firms use the PAYBACK method to evaluate capital projects. So Answe is C. Storm I think you were right on the component of CAPM that specifically relates to the company is (kM - kRF) . Km is the market risk premium of the particular Asset class, where as Beta is the I believe measure of by how much the Asset Class is riskier than the Industry.